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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