Joint Committee on the Draft Gambling
Bill
Written Evidence Presented
By:
British Beer &
Pub Association (BBPA)
The Trade Association representing the interests
of owners and operators of over 35,000 public houses throughout
the UK
Supported by:
British Institute
of Innkeeping (BII)
The professional body providing services
& training to managers and licensees in public houses throughout
the UK
Federation of Licensed
Victuallers Association (FLVA)
Organisation representing self-employed
licensees in England
Association of Licensed Multiple Retailers (ALMR)
Represents the interests of smaller independent
companies within licensed retailing
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.[1]
1.5. Futhermore, the proposed
reforms threatens the economic position of a sector which not
only employs 600,000 people but services 80% of the population
against a sector which employs 12,000 people and services only
3% of the population3.
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% of British adults are in favour
or not opposed to fruit machines in pubs[2])
- 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 eighteens.
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.R 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.
R 92% 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. 76% of the adult population support a statutory
limit of 18. MORI Research commissioned by the BBPA, October 2001.2
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 & 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%[3]
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 and 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%, clubs 10% and bingo 30% 3[4].
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. [5]
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
| 1.21
| 35,861
|
| 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 90%
percent of the adult population visit pubs, some 75% 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.
2.1. 85% of pubs have two machines or less but
a significant 18%, mostly in larger venues, have two or more with
about 1% having more than four. These machines are very important
to the businesses involved.
3.5
Table 1
| No. Machines per pub
| 0
| 1
| 2
| 3
| 4
| 5+
|
| % of Pubs
| 7%
| 33%
| 42%
| 13%
| 4%
| 1%
|
| No. Machines
| 0
| 28291
| 36010
| 11147
| 3427
| 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 & prizes in 2001review in
2001. Machine takings have not risen and in the last 12 months
have fallen by nearly 4%[6]
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%) over those that were currently playing machines (around 15%
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.R[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 12,0003.
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% 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% 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% over 2003.
This compares to a decline in the pub market of 20%; 30% in bingo;
whilst off-course betting would benefit by some 15%3.
6.4. The overall 20% 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[8] 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% 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 £2-3000 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% 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% 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% 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.©ã[9]
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.
1 Gambling Liberalisation and Problem Gambling: National
Economic Research Associates (November 2003).
Back
2
MORI Research commissioned by the BBPA, October 2001
Back
3
The UK Gambling Market in 2003 and 2009: KPMG Research, November
2003. Attached at Annex 1 Back
5 4 BBPA presentation to the Gaming Board Great Britain:
Triennial Review 2001.
Back
Back
6
BBPA response to HMCE: The Modernisation of Gambling Taxes: consultation
on the review of amusement machine licence duty July 2003, Attached
at Annex 2
Back
R 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
Gambling Deregulation Impact Study: Pion Economics, October 2003.
Back
©
ã 9
Conservative estimate based on 1996 figure of £60 million
adjusted for inflation. Back
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