Joint Committee on the Draft Gambling Bill

Joint Committee on the Draft Gambling Bill Memoranda

Joint Committee on the Draft Gambling Bill

Submission by Operators of Adult Gaming Centres DGB 82

December 2003

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% 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;

b. The intention to protect children and the vulnerable from harm related to gambling;

c. The extension of personal licences (taking proper account of the role of individuals);

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% 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^th 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 £3bn, following inward investment from overseas casino companies of £5bn. 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 £1bn 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 para 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% of anticipated new gambling spend will come from income growth (that would have been spent elsewhere anyway) and savings, and of the other 75%, 20% will come from other gambling products (National Lottery, Bingo etc), 50% from other leisure services (such as town centre restaurants, pubs, spectator sports, football etc) and 20% 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 3 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 4 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 £16m +, the principal 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" (i.e. 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 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.