Memorandum from Barcrest Group (DGB 53)
INTRODUCTION
Barcrest Group is a wholly owned subsidiary
of International Game Technology (IGT), the largest designer and
manufacturer of gaming machines in the world. IGT is the world-wide
market leader in the supply of machines and systems to casinos
with an annual turnover in excess of $2 billion. It is listed
on NASDAQ and has a market capitalisation of over $10 billion.
Barcrest Group, through its divisions Barcrest
Games, Vivid Gaming, Red Gaming, Barcrest Spain and Barcrest Netherlands,
has been active in the European gaming machine market for over
30 years. We sell approximately 35,000 gaming machines per annum
to UK and European customers, making us by far the largest UK-based
designer and manufacturer of these machines. We also export casino
games via our parent company to the US market, making us the only
UK designer and manufacturer with a substantial position in the
North American casino market.
SUBMISSION BY
COMMITTEE'S
STATED THEMES
As a long-term participant in the UK gaming
industry, we have been heavily involved in the consultation process
and are pleased to note that the draft Gambling Bill appears to
be consistent with many of our own suggestions.
The draft Bill allows adults access to the full
range of legitimate gambling products available, whilst ensuring
that proper controls are in place governing all those involved
in the gambling business, children are protected and social responsibility
is recognised and dealt with.
1. The Gambling Commission
Barcrest Group wholeheartedly supports the proposal
for the UK gambling industry to be governed by a single integrated
regulatory body which will be resourced and empowered to effectively
control all companies and principal individuals involved in the
provision of gambling opportunities.
1.1 Transitional Arrangements
We welcome the proposal to create an embryonic
Gambling Commission in advance of the enabling legislation, to
work in parallel with the existing regulatory bodies.
Whilst we appreciate the heavy administrative
burden upon the Gambling Commission, it is important that the
impact of any phasing of licence introduction is minimised.
1.2 Size, Functions and Costs
The Gambling Commission will require greater
resource than the existing Gaming Board in order to exercise its
authorities and responsibilities, and we presume the increased
costs will be met by the annual licence fees for the increased
number of licence holders.
1.2.1 We suggest that the annual licence
fee is not a flat rate but is calculated with regard to each specific
gambling sector in order that no inequities arise that could unfairly
damage the business in any one sector.
1.3 National Lottery
In principle, as a recognised gambling activity,
the National Lottery should be regulated by the Gambling Commission
in line with all other gambling activities (including spread betting).
However, we do recognise that the support of
good causes requires the National Lottery to be protected, and
retaining the National Lottery Commission does separate it from
the rest of gambling.
1.3.1 We suggest that social responsibility
considerations must require that the age limit for participation
in the National Lottery be raised to 18.
1.4 Codes of Practise
The industry has developed and embraced a number
of voluntary Codes, but history shows that the integrity of the
industry can be compromised by a small number of companies or
individuals who ignore voluntary Codes.
We are therefore pleased that the Gambling Commission
is to issue Codes after full and proper consultation, and will
enforce them accordingly. It is disappointing that failure to
comply with a provision of a code shall not of itself make a person
liable to criminal or civil proceedings although it will be admissible
in court proceedings.
1.5 Future Proofing
We note that the Secretary of State is to be
given powers to amend many sections, and it seems that this would
be sufficient to react to any foreseeable technological or cultural
changes.
In particular, the Secretary of State has the
power to define the machine Categories A to D, together with any
conditions to be applied to licenses (such as randomness).
1.5.1 We suggest that any amendments or
definitions made by the Secretary of State should involve a proper
consultation process with the Industry, and to remain in force
for a considerable period of time (say, 10 years) so that businesses
may have the stability to invest in their long-term plans.
1.6 Spread Betting
In principle, as a recognised gambling activity,
spread betting should be regulated by the Gambling Commission
in line with all other gambling activities (including the National
Lottery).
We note that spread betting will continue to
be regulated by the Financial Services Authority pending a review
by the Gambling Commission after five years, so it is therefore
surprising that the Secretary of State does not appear to be empowered
to amend sections 7(1) and 7(4).
1.6.1 We suggest that the Secretary of State
is empowered to amend sections 7(1) and 7(4) so as to allow the
Gambling Commission to undertake the regulation of spread betting
if the review requires it.
2. Protection of Children and Vulnerable
Persons
2.1 Social Protection
Gambling is an activity that we know is susceptible
to addictive behaviour, so we welcome these proposals that restrict
exposure to gambling (other than lotteries, football pools and
Category D machines) to adults.
There is little or no evidence that children's
games for prizes are harmful, and we are pleased that low stake
and prize Category D machines will continue to be allowed, supporting
those many traditional businesses who have provided family entertainments
for many years.
2.1.1 However, we remain concerned at the
proposal for Category D machines to be available in cafes, fish
& chip shops etc where history has demonstrated that these
locations are not always well regulated. The Gambling Commission
should be particularly vigilant to ensure that there is proper
regulation in such establishments.
2.2 Gambling Industry Charitable Trust
As the trust was set up by the industry itself,
many of the original trustees were not independent of the industry,
but this is changing and a number of the current trustees may
be considered truly independent.
This trust is voluntarily funded by the Industry,
and has been successful in raising sufficient funds. However,
it is imperative that all companies involved in gambling should
accept responsibility for social problems that gambling may cause
and contribute to this fund. This may of course require the Secretary
of State to impose a levy as required.
2.2.1 We suggest that the National Lottery
and those companies specialising in spread-betting must contribute
to the Gambling Industry Charitable Trust.
3. The Proposed Sectoral Framework for Gambling
Regulation
3.1 Licensing
Barcrest Group welcomes the proposed strict
licensing regime so long as the Gambling Commission is adequately
resourced to carry out its functions effectively, both in terms
of issuing licences and in the subsequent policing of licence
related activities.
We are particularly pleased to note that game
designers and manufacturers will be licensed in addition to gaming
machine operators and site owners.
We welcome the proposed 10 year life for licences,
as it is important that businesses have sufficient stability to
invest in future plans. It is equally important that existing
businesses are able to protect their past investments.
3.1.1 We suggest that grandfather rights
should apply to the number of machines already established for
premises.
3.2 Casinos
International experience suggests that the proposals
in respect of casinos will have an overall positive effect upon
the economy, with the attendant regeneration of local economies.
We note that the number of machines per gaming
table is specified, and fully support the proposal for the Secretary
of State to be empowered to amend this.
However, we are concerned with the proposal
to allow machines to be linked only within a single casino premises,
and that there is no provision for the Secretary of State to amend
this.
3.2.1 We suggest that the Secretary of State
is given the powers to amend section 201 so as to allow linking
of machines between separate casino premises in line with other
jurisdictions.
3.3 Betting Exchanges
We are pleased to note that betting exchanges
are to be licensed as betting intermediaries, and that the new
offence of cheating goes some way towards controlling them.
3.4 Remote Gambling
We are pleased that remote gaming is addressed.
UK gambling should not be threatened by unregulated offshore developments
which could increase problem and under-age gambling, reduce UK
tax revenues and support organised crime.
We fully support the proposal for the Gambling
Commission to approve UK Internet gambling sites and games, and
for it to be an offence to invite or enable a person in a prohibited
territory (as defined by the Secretary of State) to participate
in remote gambling.
3.5 Gaming Machines and Amusement With Prizes
(AWP)
We note that fixed-odds betting machines (where
the event is virtual) will be defined as gaming machines, but
a recent agreement between the DCMS, the Gaming Board for Great
Britain and the bookmakers has endorsed the use of up to four
of these machines in each Licensed Betting Office (LBO), with
a £100 stake with £500 jackpot. The resultant proliferation
of these machines will make it very difficult to sustain the principle
for Adult Gaming Centres to be permitted the same type of machines
as the LBOs (presumed to be Category B and C machines), so either
these machines will be restricted to a maximum £1 stake in
line with current Category B proposals, or the maximum stake proposed
for Category B machines needs to be increased to £100.
3.5.1 We recommend that fixed odds betting
machines are formally defined as Category B machines. Given the
agreement on fixed-odds betting machines, the position for all
Category B machines should be: maximum stake £100 and maximum
prize £500, with the possible exception of machines in private
clubs where the levels of stake and jackpot could be slightly
lower if considered necessary.
Barcrest Group welcomes the proposal for a Category
D children's games with trivial stake and prize levels of 10p
and £5 respectively.
We welcome the provision for the Secretary of
State to define the characteristics of Category A, B, C and D
machines, and in particular the recommendations for a periodical
review of the associated stake and prize levels.
We note that no reference is made to the testing
of machines, but believe that the current voluntary testing regime
as operated between the Gaming Board for Great Britain and BACTA
should be adopted by the Gambling Commission for Category B, C
and D machines. It is appropriate that unlimited stake and jackpot
Category A machines are subject to a formal approval process.
3.5.2 We suggest that unlimited stake and
jackpot Category A machines are subject to a formal machine approval
process, and that Category B, C and D machines are subject to
the existing machine testing regime operated by BACTA and the
Gaming Board for Great Britain.
Clauses relating to the number of machines to
be allowed in pubs are missing, but we understand that the proposal
will be for two Category C machines as an adjunct to the liquor
license.
3.5.3 We suggest that the number of machines
to be allowed in pubs as an adjunct to the liquor license is revised
upwards to four so as to both protect the Local Authorities from
the resultant increase in burden, and to allow existing businesses
sustain their business plans. We further suggest that Grandfather
rights should apply to the number of machines already established
for pubs.
We are concerned that 6(2(a(ii))) may be interpreted
so as to define Skill With Prize (SWP) machines as gaming machines,
as this could outlaw machine-based tournaments which are linked
together via a central server and where the winnings may depend
upon all players.
3.5.4 We suggest that the wording of 6(2(a(ii)))
is reviewed so as to clearly exclude Skill With Prize machines.
3.6 Bingo Clubs
The smallest new casino to be permitted will
be larger than many existing Bingo clubs, so it is unlikely that
many will be converted to casinos, leaving Bingo as a local venue.
3.7 Tax Implications
It is difficult to see how the existing taxation
regime will fit with these proposals, as the profile of the casino
sector will be dramatically altered.
In addition, the current Amusement Machine License
Duty regime is currently under review, and it is unlikely that
a Gross Profit Tax regime could be easily applied, which indicates
that a single taxation method cannot be adopted for all gambling
activities.
Furthermore, taxation levels for remote (offshore)
gambling activities must be low in order to attract such businesses,
and this will require consolidation with terrestrial gambling
activities.
3.8 Society Lotteries and Prize Competitions
We welcome that basic literacy and numeracy
skills will no longer be considered sufficient to provide the
barrier necessary to differentiate a lottery from a prize competition.
CONCLUSION
The Government's proposals fit well with the
principles we believe are fundamental to a successful gaming legislation,
and we will continue to work with the Department of Culture, Sport
and Media to suggest improvements where possible.
We note that a great deal of detail work is
yet to be done before the proposals can be laid before Parliament,
and we have offered to provide the Department of Culture, Media
and Sport every assistance.
If the Joint Committee on the Draft Gambling
Bill would like clarification of any of the above matters we will
be happy to make Barcrest Group representatives available.
December 2003
| 
