Joint Committee on the Draft Gambling Bill First Report


Memorandum from Rileys Limited (DGB 166)

  Thank you for your letter just before Christmas responding to our initial enquiry on how best to contribute to the work of the scrutiny committee on the draft Gaming bill. As suggested we have now waited for the publication of the specific clauses addressing commercial clubs as well as listening to the robust debate which has taken place in varied sessions over the many issues surrounding gaming machines. It seems sensible now to respond in full to the Government's proposals while also providing you with some background on Rileys.

RILEY'S

  As part of Georgica plc, I am proud of the business we have built up across the country. We now operate 160 Pool and Snooker Clubs throughout England, Scotland and Wales. There are now over 1,400 such venues in the UK but no other operator in the country runs more than nine sites. Currently, we are the only truly national Pool and Snooker operation. We employ 1,829 staff working in 131 towns and cities around the country. In the absence of any other corporate operations or specific trade associations I believe we are the only credible voice able to speak on behalf of the "commercial" cue sports sector.

  I am also proud of the other "roles" our clubs play up and down the country.

  Our clubs have been and will continue to be the training camps for the great cue sports champions of the future. These venues provide local competitors around the country with a place to develop and hone their skills. I do not think it is too much to argue that they are places where future world champions learn their trade before going off into the world of competitive snooker and pool.

  Equally, we are very proud of the role we play in local communities. We provide a place for young people to gather and socialise, often in areas that are struggling economically. Our clubs provide a positive social gathering place and entertain over the course of a year approximately 75,000 under 18s. The social importance of such venues should not be under valued.

  Virtually all of our clubs are proprietary members' clubs and have the benefit of Part III licences and up to three (3) £250 Jackpot machines. These machines provide an absolutely vital revenue stream to our businesses and it is fair to say that without them, and this is true throughout the industry—not just for Rileys—many clubs would not exist. This is a "low ticket/low volume" business. Margins are small. For example, Rileys in 2003 made before tax approximately £11 million in operating profit, which approximately £8.5 million came from machine revenue.

A SPECIFIC EXCEPTION

  I cannot therefore overstate then how fundamentally important machine revenue is to the viability of our operations. For that reason we continue to be pleased with the Government's decision—in the wake of the contrary Budd report recommendations—to make an exception for member clubs and continue to allow the presence of gaming machines. This was the right thing to do and I continue to be gratified to hear how determined Ministers are to keep this exception in the final bill when it becomes law.

GENERAL OBJECTIVES

  In general we continue to support the Government's efforts to modernise the regulatory environment Gaming operates under. Many of the proposed changes are long overdue and will enable more people to enjoy freedoms already available in many other countries. Nonetheless, I would re-iterate the caution I have expressed to officials and which I have heard (or read) others express to the committee about how much "new" economic activity these changes will create "overnight". I fear the media and those with a vested interest in the industry may be overly optimistic about the scale of prospects for the liberalised market. I hope the Government exercises caution before jumping on that bandwagon.

  As your oral evidence sessions have highlighted there are very divergent views on how large this "new" market for gaming will be, particularly in regard to casino development. It will take time for markets to evolve and only then will we be able to tell how many operations will succeed. I expect there will be many surprises along the way

  Looking ahead, I thought I should confirm our position on the specifics of the bill and clarify our particular interests. I have tried to set these out briefly here, looking initially at concerns rising from the first set of published materials before moving onto the more recently published ones. Obviously, I would be happy to discuss these in greater detail with the Committee if that would be in anyway helpful in the future.

LOCAL AUTHORITY ENFORCEMENT

  We continue to harbour concern that the joint burden of taking on enforcement responsibilities for the new liquor licensing regime, combined with the responsibilities attached to monitoring gaming, could be too much for many local authorities. Recent evidence taken by your Committee has only further re-enforced these concerns. It seems even the Councils and the LGA share our worries.

  Not only will the authorities potentially face these new burdens almost simultaneously (between 2005 and 2006) but also they will both require new people with some specialist knowledge and much more money (we have seen or heard estimates ranging from three to five times as much as current Gaming Board spending).

  Based on our experience with local authorities in the past re public entertainment licence and planning this prospect does not instil great confidence about how the new rules will actually be regulated on the ground. I was pleased to hear about the efforts by DCMS to work with the LGA and others to ensure that this transition from the Gaming Board and Magistrates Court to Gambling Commission and Local officials is as smooth as possible. While we understand the Government's commitment to local discretion, accountability and empowerment we remain concerned about the inconsistency this could leave in place around the country.

  I would only add that involving industry now in discussions regarding how that might work could be a useful part of the planning process.

THE COMPETITIVE LANDSCAPE

  We were concerned that the Regulatory Impact Assessment which accompanies the draft bill assumes that the changes in the machines market will have a "neutral" impact on our business. We disagree. This assumption is wrong.

  Firstly, it is our view at Rileys that the new freedoms offered to arcades and family amusement centres will almost certainly impact on our operations in a negative way. This happened when Fixed odds betting terminals were introduced—our machine revenue dropped almost immediately and we believe this will happen again with the introduction of more machines on the high street.

  Historically, we believe, such venues have been "under-regulated" and this is a good example of an area where the new pressures on local authorities will be tested. There are approximately 2,000 amusement arcades spread around the country and many of them will become AGC's (when the new legislation is implemented), putting in place four £500 jackpot machines. We could see the proliferation of as many as 8,000 of these machines suddenly available in high street venues up and down the country. Already in London I have seen an arcade advertising "£500 prizes coming soon". As these centres expand the scale and scope of their machine operations we fear that officers will find it difficult to keep up with efforts to avoid the spirit of the law (eg separate entrances for adults and children). It is our view that if the Government is fearful of a problem with gaming machines after liberalisation, this is where it will happen.

  Secondly, as I have outlined to officials, we would like to see the size of our prize limits raised from £250 to £500. We believe that if this level were to be raised in other venues (eg Bingo Clubs, Betting Shops, Adult Gaming Centres, where the maximum number for each of the premises would be four machines) it would be appropriate to do so in our clubs as well. We do not think, as the number of machines we have is so small and they remain an ancillary activity, that such an increase will lead to problem gambling. We agree with those who have appeared before the committee who have argued eloquently that increased prizes do not drive excessive gaming.

  As a related point, we would indeed encourage the Government to urge the new Gambling Commission to initiate a periodic and regular review of prize limits. We would support either a continuation of the Gaming Board's review every three years or even better, an examination every two years. If there is no change in the prize limits allowed on our machines in the final bill, I thought it important to let you know that it is an issue we will return to ask about in the future.

CODES OF PRACTICE

  I was pleased to hear that the Government is working with the Gaming Board on development of Codes of Practice. This is an issue we have a great deal of experience with and believe is fundamental to ensuring that there are no problems related to the presence of minors on the premises. As I explained to the Department, we are very interested in helping the Board prepare the groundwork for the development of an industry wide code. I will forward the Riley's Code as promised, under separate cover.

NEW CLAUSES/MEMBERS CLUBS

  We have carefully reviewed the new clause relevant to our operations, defined as "commercial clubs" and have a few comments, questions and concerns.

  Clause 227 (8) seems to be saying that a guest of a member can only participate in gambling in a members club or a miners' welfare institute, but not in a commercial club. This seems unfair and is contrary to current practice.

  There seem to be no clauses, which allow a member of a club in London to use that membership in a club in Liverpool owed by the same group. This, would amount to in practice, a loss of privilege for our existing members who generally can now use their local membership in other clubs around the country.

  Clause 229 (4) (d) excludes children and young persons from any area in a club where gambling is taking place. This could be interpreted as a physical exclusion or lines on the floor. It has always been understood that children and young people will be forbidden from playing machines. The physical layout of our premises does not allow for such complete and total separation. It is not possible for us to separate the machines from the rest of the venue in a way that guarantees, for example, that young people will not pass by on the way to the toilet area.

  Clause 230 (1) c seems to prevent our clubs from charging members guest fees when they bring non-members to play snooker or pool. Since their prime reason for visiting the venue is not gaming this seems unfair and we suspect and hope it was not drafted with our operations in mind.

  Thank you again for taking the time to consider our views on these important issues. I hope you will feel free to contact me in the future on any matters to do either with Rileys specifically or the member's club industry generally. Needless to say you should consider this correspondence our response to your formal request for submissions on the draft bill. We will be copying these thoughts to officials in the DCMS.

March 2004


 
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