Memorandum from the British Beer and Pub
Association (BBPA) (DGB 76)
1. EXECUTIVE
SUMMARY
1.1 This paper, together with this Executive
Summary, presents a short commentary on the relevant points described
in scope of the Committee's Inquiry. This is followed by a more
detailed explanation of the BBPA's consideration of the effects
of the Bill. The pub sector is disappointed that the clauses as
they relate to pubs have not yet been drafted and that the specific
details are as yet unknown. Nonetheless the BBPA is able to submit
these comments in the light of the information that has been provided.
1.2 The UK pub sector believes that the
draft Gambling Bill is fundamentally flawed in two major respects:
1.3 It seeks to alter the current industry
regulatory arrangements to the detriment of many in the gambling
sector, to the benefit of a much smaller sector, namely the casino
market. While expanding the opportunities for hard gambling it
seeks to introduce further regulation on softer "social gambling".
1.4 The expansion of hard gambling will
increase problem gambling, chiefly through large numbers of unlimited
stake and prize gaming machines in casinos. Some estimates, based
on the Australian experience put this at a three-fold increase
in problem gambling.[2]
1.5 Furthermore, the proposed reforms threatens
the economic position of a sector which not only employs 600,000
people but services 80 per cent of the population against a sector
which employs 12,000 people and services only 3 per cent of the
population[3].
1.6 Nor is the BBPA comfortable with the
notion that the proposed reforms will increase problem gambling,
the remedy to which is to be the raising of funds to treat those
unfortunate enough to suffer as a result.
The submission makes the following major points
in addition:
1.7 All Cash Machines are being unnecessarily
restricted (72 per cent of British adults are in favour or not
opposed to fruit machines in pubs[4]—maximum
stake and prize levels should be increased to 50p and £50
respectively.
1.8 Grandfather Rights preserving the number
of machine permits that cannot be revoked without due cause should
be included in the Bill.
1.9 The granting of four gaming machines
without a hearing is sought, on the grounds of better regulation,
reducing burdens on industry and local authorities alike. Such
granting will not lead to any significant proliferation in the
pub sector, as the market and price of entry will ensure much
the same level of uptake.
1.10 Full support is given to the raising
of the age of play to over 18s.
1.11 The industry would like to see Statutory
National Guidance developed in consultation with local authorities
and the industry. Such guidance should cover conditions placed
in respect of machines and the determination of machine numbers
over and above the statutory right.
1.12 It is the function of the legislation
to avoid or minimise problem gambling. We see no need for or a
real demand for a large increase in hard gambling. We cannot agree
that the provision of funds to treat those that are then adversely
affected justifies such expansion.
1.13 The introduction of very high stake
and prize Fixed Odds Betting Machines has demonstrated the harmful
effects of ill-considered increases in gambling facilities both
on other sectors in the market and in problem gambling.
1.14 The BBPA would very much welcome the
opportunity to discuss this submission with the Joint Committee.
2. COMMENTARY
ON THE
SCOPE OF
THE COMMITTEE'S
INQUIRY AS
THEY RELATE
TO GAMING
IN PUBS
2.1 Transitional Arrangements (not yet published)
BBPA seeks to secure grandfather rights of the
gaming machine permits held at the time of Royal Assent. Permits
should remain in force unless there is breach of the law or operating
conditions. Permits will be attached to the Premises Licence held
under the Licensing Act 2003 and should therefore not be subject
to renewal. An annual fee to be paid alongside the annual charge
made under the Licensing Act.
2.2 Implications
The "licensed sector" conditions relating
to gaming machines should be contained in Statutory National Guidance
drawn up in consultation with local authorities and the industry.
2.3 Regulatory Structure
The BBPA does not believe that the regulatory
structure will prove to be robust insofar as the probable increase
in problem gambling will need to be addressed, as in Australia.
It will be extremely difficult to redress problems after the event.
2.4 Protection
The pub sector supports the legal backing for
its voluntary action on preventing under 18s playing gaming machines
in pubs.[5]
The BBPA has pressed for action over many years on this issue.
It does not, however, believe that there is any need for codes
of practice to accompany this simple measure. It for public house
managers and owners to best decide how to ensure the law is obeyed.
2.5 Social Protection
The Bill is strong on the prevention of crime
directly related to the operation of the industry itself but weak
in regard to the protection of individuals from the proliferation
of hard gambling. The expansion of hard gambling envisaged in
the draft Bill will adversely affect those that are particularly
vulnerable, significantly increasing problem gambling. Social
gambling, however, as described in the Government's proposals
would not lead to a rise in the incidence of problem gambling
which is generally acknowledged to be currently at a low level.
2.6 Gambling Industry Trust
We do not believe that the adverse social consequences
should be met by establishing funds to treat people who have suffered
through over-provision of hard gambling. The Bill should ensure
that such consequences do not arise in the first place.
2.7 Potential for US-style resort casinos
The BBPA would support a very limited and measured
expansion of casino facilities to assist in economic regeneration,
providing there were limits on the numbers of very high stake
and prize machines. However, it would not wish to see wholesale
expansion throughout the UK, particularly of large casinos, very
likely funded from overseas with limited benefits to the UK. We
are concerned about the economic disregard that has been applied
to the rest of the market and the pub sector in particular, which
it is estimated will fall by some 20 per cent3 over five years.
At the very least we would advocate a slow and careful phasing
in of facilities.
2.8 On-line Gambling
The BBPA recognises the need for regulation
of on-line gambling and believes that the licensing of UK sites
is the best way forward. This could be achieved without widespread
disruption and, as with the limited development of casinos, could
be achieved less controversially and more speedily with targeted
legislation.
2.9 Gaming Machines and Amusement with Prizes
(AWP) Machines
As previously stated the impact on pubs, clubs
and bingo is likely to be severe. Pubs are likely to see a loss
in income of some 20 per cent, clubs 10 per cent and bingo 30
per cent 3. The exposure of children to gaming in these venues
is in our opinion and experience grossly overstated. The lack
of legislation has operated against the pub industry. The BBPA
whole-heartedly supports a legal age of play of over 18 for all
gambling products with the single exception of Category D machines
that are specifically designed for enjoyment by children.
2.10 We firmly believe that the current
prize regime for All Cash Machines (ACMs) is not meeting customer
expectations and that the prize should be raised to a maximum
£50 with a maximum stake of 50 pence. This should also be
accompanied by a commitment to permit regular reviews to maintain
those expectations and competitive position. The BBPA calculates
that such a regime would not greatly increase the number of players
nor the average spend. This is supported by our research and experience
of the effect on the market when the prize was raised from £15
to £25.[6]
2.11 Tax Implications
We see no reason to change the tax regime for
machines in pubs. We are opposed to the introduction of Gross
Profit Tax (GPT) which would not be appropriate for mixed product
businesses such as pubs. The BBPA is also concerned that GPT would
encourage the proliferation of gaming machines by the removal
of a substantial part of the barrier to entry. We believe that
in this respect the current regime works well. However, we do
not believe that the relativities of AMLD as between low prize
machines and unlimited prize machines could remain at their current
levels should such machines be introduced into casinos. In such
an event it might be appropriate to extend GPT to such venues,
but leave ALMD in place for others.
3. GAMING IN
BRITAIN'S
PUBS
3.1 There are 60,000 public houses in the
UK with the number of managed houses (11,700) in decline over
recent years. 18,700 are independently operated free houses. The
remaining 29,600 pubs are mostly operated by independent small
businesses under leases or tenancy agreements from breweries or
pub owning companies.
Table 1
|
Types of
Pubs | Brewery
Owned
| Pub
Company |
Other | Totals
| Machine
Density
| No.
Category C
Machines
|
|
| Managed houses | 4,000
| 7,700 | |
11,700 | 2.01
| 23,517 |
| Tenanted houses | 5,800
| 23,800 | |
29,600 | 1.2
| 135,861 |
| Independent pubs | |
| 17,050 | 17,050
| 1.0 | 18,755
|
| Unclassified* | |
| 1,650 | 1,650
| 1.0 | 1,650
|
| 9,800 |
31,500 | 18,700
| 60,000 | 1.33
| 79,738 |
|
*pubs are owned by small micro-brewers or small independent
companies and not generally regarded as freehouses/independent
pubs.
3.2 Gaming on fruit machines has been a feature of the
UK public house for nearly 40 years and represents the only but
important source of gambling revenue.
3.3 Ninety per cent of the adult population visit pubs,
some 75 per cent on a regular basis amounting to some 15 million
visits a day.
3.4 Machines offering £25 maximum prize (ACMs referred
to as Category C machines) are situated in most pubs. Around 80,000
Category C machines are sited in nearly 56,000 public houses.
3.5 Eighty-five per cent of pubs have two machines or
less but a significant 18 per cent, mostly in larger venues, have
two or more with about 1 per cent having more than four. These
machines are very important to the businesses involved.
Table 2
|
No. Machines
per pub
| 0
| 1 | 2
| 3 | 4
| 5+ |
|
| % of Pubs | 7%
| 33% | 42%
| 13% | 4%
| 1% |
| No. Machines | 0
| 28,291 | 36,010
| 11,147 | 3,427
| 861 |
|
3.6 Machine income occupies an important place in the
economy of the pub, a sector that generates around £20 billion/year
and employs over 600,000 people in full or part-time employment.
3.7 Income from machines is an important source of revenue,
which when translated to the bottom line (in many cases the direct
earning potential of the individual licensee) forms a significant
part of the final net earnings of the pub.
3.8 Machine income contributes significantly to the ability
to invest and produce profit. In the many more numerous individual
small businesses it is a very important contributor to the individuals'
income and consequent lifestyle.
3.9 Gaming machines in public houses have been limited
to the lower, softer end of the market and despite an increase
from £15 to £25 at the triennial of stakes and prizes
in 2001review in 2001. Machine takings have not risen and in the
last 12 months have fallen by nearly 4 per cent5 despite a general
rise in other areas of the business. This fall is attributed to
the appearance of Fixed Odds Betting Machines in betting shops,
which are a direct competitor to the All Cash Machine market.
4. REVIEW OF
GAMBLING REFORM
4.1 Prior to the 1998 Gaming Board of Great Britain's
triennial review of gaming machine stakes and prizes the Board
called upon the industry to look forward and present their vision
for the future. The BBPA took this request seriously and commissioned
research from MORI seeking to establish the expectations of pub
visitors and the effect of meeting such demands might be. The
BBPA presented this research as part of its presentation to the
Gaming Board and made the following proposals:
4.2 . . .That the prize level be raised from £10
to £50 in three stages spread over three reviews, £50
to be reached by 2004. The figure of £50 was based on research
that indicated that a prize of £50 or greater would go a
long way to meet the aspirations of players and would not be considered
unreasonable by non-players. The research indicated that such
a prize level would result in a small increase in players (5 per
cent) over those that were currently playing machines (around
15 per cent of pub customers).
4.3 . . .That the BBPA's initiative in the voluntary
prohibition of under 18s be enshrined in law, providing a legal
framework for enforcement.[7]
Despite repeated requests the Government has not sought an opportunity
to introduce such a legal requirement until now.
4.4 . . .That pubs should be allowed to install up to
four machines as of right, applications beyond four to be decided
by a hearing. The BBPA argued that this would not lead to a large
increase in machine numbers, since the market and the price of
entry would inhibit any significant proliferation. Such a change
to the procedures would allow pubs to meet such demand while reducing
the bureaucracy involved in the application process.
4.5 The BBPA has been consistent since that time in seeking
these aspirations both in discussions with Government and the
Gaming Board. To date, a £25 prize and a 30p stake have been
granted; a legal age has not been introduced; and the industry
continues to be constrained in the draft Bill to two machines
with more on application.
4.6 Early in its first term the Government announced
that there would be no wholesale reform of the Gambling Act. The
BBPA along with many others in the gambling industry were not
pressing for such wholescale reform and were therefore not displeased
by the announcement. It was, however, recognised that certain
changes would be needed, in respect of the appearance of Internet
gambling and the Association continued to press for a prohibition
of under 18s playing gaming machines in pubs, despite the fact
that it believed that its own initiative in signing machines and
enforcing such a ban was effective.
4.7 There have been other developments following the
publication of the Budd Report that have been beneficial to other
gambling sectors to which we have not been opposed, although we
recognised that they might have some adverse effect on the pub
market.
4.8 We would recognise that some, careful extension of
casino facilities could be beneficial, particularly in respect
of resort casinos in support of regeneration projects, provided
they are limited and phased in over time.
4.9 We remain, however, particularly perturbed at the
introduction of Fixed Odds Betting Machines (FOBMs). The Gaming
Board supported by the Government took the view that these were
gaming machines and therefore illegally sited. We were advised
that this would be tested in court. It has since transpired that
a deal has been traded with the betting shops and that these are
to be a permanent feature in the market place. Of particular concern
is the maximum stake of £100 per game that has been agreed
with the bookmakers, which is an extraordinarily high level. The
Association has written to the Secretary of State on this issue.
4.10 The pub industry has seen a fall in income over
the last year which can be directly attributable to the competition
represented by Fixed Odds Beeting Machines.
5. OVERVIEW OF
THE INTENTION
AND CONTENT
OF THE
DRAFT GAMBLING
BILL
5.1. The BBPA is unable to comment directly on the Draft
Bill as it relates specifically to gaming in pubs since the relevant
clauses have not yet been made available.
5.2. We are disappointed by this omission and feel that
it is indicative of the Government's attitude to gaming in this
sector which it appears it views as irrelevant at best and unimportant
both to business and to its customers.
5.3. The policy documents made great issue of providing
gambling as part of "mainstream leisure" yet ignores
the third largest gaming sector in terms of revenue and the leisure
activity provided by 60,000 pubs which provides 600,000 jobs.
5.4. On the other hand the Bill promotes the interests
of a small sector of the market, at the hard end of the gambling
market for a casino industry which currently only employs 12,000[8].
5.5. The Secretary of State in the forward to the policy
document states that "three-quarters of the adult population
participate in gambling" and that "most people regard
it as an enjoyable and predominantly harmless leisure activity."
She goes on to say that "gambling machines will not invade
normal social spaces," ignoring the fact that of the three-quarters
that gamble . . . participate in the National Lottery, which is
sold through such "normal social spaces."
5.6. The policy document also ignores the fact that only
3 per cent of the population currently visit casinos, hardly a
mainstream activity. Pub-going conversely is a mainstream activity
and is described as providing "social gambling including
simple low stake gambling in pubs and clubs." By this definition
social gambling would also include jackpot machines in clubs at
£250 prize level.
5.7. We do not understand therefore, why the drafting
of this Bill seeks to impose a restriction on prize levels of
£25 in pubs and yet promotes the hard end of the market that
is aimed chiefly at casinos involves only 3 per cent of the population
(over 18) and only employs 12,000.
5.8. The Government acknowledges that the 1968 Act "has
done its job well" and that as a result "Great Britain
has a well-established reputation for integrity in its gambling
industry." The BBPA would agree with this statement and has
major concerns over the direction of reform which will lead the
market in other directions. The 1968 Act has determined the size
and the shape of the market and it is this market that is well
respected. The Draft Bill seeks to expand "hard-gambling"
in casinos and betting shops in a manner which will favour large,
mainly international businesses which will impact upon the much
smaller, entrepreneurial UK businesses both in terms of their
economic impact and the social ambience within which gambling
will take place. There will be an impact on British culture that
has not, in out opinion, been properly considered.
6. ECONOMIC IMPACT
OF THE
DRAFT BILL
ON THE
PUB SECTOR
6.1. The BBPA together with the Bingo Association commissioned
research from KPMG to examine the likely effects of the Gambling
Bill proposals on the gambling market. A copy of the report is
attached at Annex . . .
6.2. KPMG has looked at the market as a whole and has
estimated the effects of the Government's proposals five years
from introduction of the Act.
6.3. Their estimate of the major changes is that within
five years of implementation, the casino market will have seen
a real growth of 217 per cent over 2003. This compares to a decline
in the pub market of 20 per cent; 30 per cent in bingo; whilst
off-course betting would benefit by some 15 per cent.[9]
6.4. The overall 20 per cent growth in gaming yield is
achieved by those at the harder end of the market namely, casinos,
adult gaming centres and betting at the expense of the softer
gambling taking place in bingo, pubs, clubs and football pools.
The biggest "winners" of course are casinos who by their
own projections contained in study undertaken by Pion Economics[10]
expect to gain an additional 27,000 jobs. Such jobs are likely
to be entirely negated by a consequent loss in other industries.
While the Pion Study recognises some of the job losses likely
to result in some other sectors such as bingo, no mention is made
of the effect on the pub sector.
6.5. In the pub sector the loss of 20 per cent in machine
income is reflected almost exclusively through to this bottom
line and will not only affect jobs throughout the pub estate by
can be expected to severely damage the tail-end of the market
where the loss of £2-3,000 will be the driver to send that
business into permanent decline, out of the market altogether
to end up in the housing stock. This would have a disproportionate
effect on the amount of jobs lost than would be directly effected
by a 20 per cent loss of machine income.
6.6. Deregulation in the form of Fixed Odds Betting Machines
which now appear to have established themselves in the market
has already had a marked affect on machine incomes which is estimated
have fallen by 11.4 per cent in public houses in the 18 months
to September 2003.
6.7. We are not able to evaluate the knock-on effect
of losing customers as a result of players migrating to other
venues, but given the increased facilities now being offered by
casinos and betting shops and the vastly increased facilities
that will be on offer from an expanded casino market which will
include bars and entertainments apart from gaming opportunities
it is not difficult to see that this may see a further reduction
in pub-going.
7. IMPACT ON
PROBLEM GAMBLING
7.1. The Government recognises and is proud of the fact
that the incidence of problem gambling at 0.6-0.8 per cent of
the adult population, as determined by the Prevalence Study, is
at a low level as compared to other countries where figures are
available.
7.2. The Budd Report recognised that its proposals would
lead to an increase of the incidence of problem gambling and in
accepting most of the Report's findings the Government accepts
this as the case. Indeed the Government has gone so far as pushing
for a charitable trust to be established to provide funds to deal
with this increase. It goes further in the Bill so as to take
provisional powers to impose a levy on the industry if sufficient
funds are not made available to the trust.
7.3. The pub industry through the BBPA and some of its
larger members were early supporters of Gamcare, providing funds
to support its work in the area of problem gambling. It has continued
to support work on problem gambling through its contribution to
the Gambling Trust which it saw as providing stability of funding
to those engaged in supporting those with gambling problems. The
BBPA continues to be unhappy with the pressure being bought to
bear on charitable funding which is presented as a quid pro quo
for gambling deregulation. Either the Bill is worthy in its own
right and the reforms necessary, or it is not.
7.4. The BBPA has no wish to see an increase in problem
gambling and has consistently taken a measured approach to any
changes it has sought. Likewise it has no ambitions to emulate
the Australian market and finds comparisons with the UK irrelevant
to the argument since legislation currently exists to prevent
such an outcome. Gaming is seen as an integral part of the pub,
which should not dominate the ambience of the British pub which
is a very important part of our popular culture. Pubs are also
a major fund-raiser for a whole variety of local and national
charities. It is estimated that over £70 million is raised
for charities in this way every year. [11]
7.5. Gamcare has reported an increase in calls to its
helpline which it accounts for in the introduction of FOBMs, and
interactive channels such as internet and television betting3.
7.6. A recent report published by National Economic Research
Associates (NERA) 1 predicts a three to four-fold increase in
problem gambling if the Government's proposals as contained in
its Draft Bill are progressed. Much of this increase it attributes
to the introduction of casino slot machines.
7.7. The Pion Study whilst making out the economic case
for the large scale expansion of casinos, makes no mention of
any consequent rise in problem gambling. Neither does this study
make any mention of the effect on the pub market although describing
such effects on other sectors of the market.
7.8. The BBPA is not comfortable with an explosion of
gambling opportunities which will lead to a rise in problem gambling
when it will inevitably, but equally unfairly, be caught up in
the backlash against gambling in all its forms.
7.9. The pub industry does not recognise any opportunities
for its sector in this Bill nor does it therefore accept that
it would have any responsibility for any increase in problem gambling
that will result. The modest changes that the sector would be
seeking are sufficiently moderate within the current framework
particularly given the changes that have already taken place more
recently. Such changes as the pub sector is seeking will be ever
more important in that context and increasingly important if the
proposals in the Bill are taken forward. Small businesses, which
form the far greater part of pub business are often dependent
on machine income to maintain the viability of those businesses.
7.10. The BBPA very uncomfortable with the idea that
the Government can contemplate a change in the law, that it can
easily predict will lead to an increase in social problems and
that it proposes to deal with such problems by setting up a "treatment"
fund. It would surely not get away with such thinking in other
areas of social difficulty and deprivation.
8. CONCLUSION
8.1. The BBPA and those that support this submission
believe that the Government's proposals and the intention behind
the Gambling Bill are seriously flawed in two major areas of policy.
8.2. Firstly, it seeks to expand a small part of the
gambling industry (namely casinos) at the hard end of gambling
which will be of benefit only to larger, probably multi-national
or overseas companies, to the detriment of the many smaller, mostly
UK businesses who will pay the price both in earnings and in jobs.
8.3. Secondly and perhaps more importantly it seeks to
ignore the significant increase in problem gambling which will
result through the panacea of "Codes of Practice" and
a fund to fix those who have fallen victim to the worst kind of
gambling addiction. This is a social experiment that is being
taken much too far, much too quickly.
8.4. The Government should step back from its proposals,
take a fresh look and seek only to remedy those areas that are
in real need before irreversible changes are made which will take
years to remedy at the expense of smaller businesses and hapless
customers.
8.5. Public houses are a very important part of the hospitality
and leisure sector and the BBPA believes that it has an important
contribution to make to the debate on gambling as it affects those
60,000 businesses. The BBPA is therefore most anxious to have
the opportunity to discuss its views on the issues with the Joint
Committee.
December 2003
2
Conservative estimate based on 1996 figure of £60 million
adjusted for inflation. Back
3
MORI Research commissioned by the BBPA, October 2001. Back
4
Gambling Liberalisation and Problem Gambling: National Economic
Research Associates (November 2003). Back
5
Ninety-two per cent of players in pubs believe that there is
already under 18s are already prohibited from playing gaming machines
in pubs; demonstrating the effectiveness of the action taken by
the industry. Seventy-six per cent of the adult population support
a statutory limit of 18. MORI Research commissioned by the BBPA,
October 2001. Back
6
The UK Gambling Market in 2003 and 2009: KPMG Research, November
2003. Back
7
The BBPA as part of its voluntary action worked with suppliers
to institute prohibition notices integrated into gaming machines
installed in public houses. Back
8
BBPA presentation to the Gaming Board Great Britain: Triennial
Review 2001. Back
9
BBPA response to HMCE: The Modernisation of Gambling Taxes: consultation
on the review of amusement machine licence duty July 2003. Back
10
Gambling Deregulation Impact Study: Pion Economics, October 2003. Back
11
Conservative estimate based on 1996 figure of £60 million
adjusted for inflation. Back
| 
