43. Memorandum from London
Clubs International Plc (GMB 39)
1. London Clubs International plc is uniquely
qualified to comment on the government's latest proposals. Unlike
any other operator in the UK or the US, we operate casinos with
considerable numbers of slot machines (eg over 2,000 in the US
and 600 in South Africa) in deregulated jurisdictions and we have
almost 40 years of casino gaming experience in the restricted
UK market place.
2. We are confused by the latest proposed
measures. There is a lack of coherence in the changes and are
we dismayed at the absence of any consultation prior to their
being made. On the basis of our experience and analysis, we do
not consider the changes will deliver what we understand to be
the desired outcomes.
3. In the absence of a statement from government
on the strategic oversight of the future gambling landscape, it
appears—from ministerial comment, etc—that the Government's
overriding concern is the protection of the vulnerable in an environment
that encourages substantial new premises delivering regenerative
benefits to identified areas. The Minister has said that the government
do not want to control proliferation by enforcing scarcity but
to exercise control through accessibility. The government expects
"traditional casino offerings to be developed alongside".
Again, we do not believe these measures will deliver these objectives.
4. The industry has indicated that the proposed
measures will almost certainly generate between 40 and 50 Regional
casinos. We think this may be a conservative estimate. Planning
policy (the sequential test) and commercial sense focuses such
developments in city centres. The commercial advantages (of the
exclusivity on Category A machines) proposed for regional casinos
would seriously impact the financial viability of existing businesses
within a 30-40 minute drive time. Given the estimated number of
Regional casinos and their likely distribution, the negative impact
on the UK industry will be significant.
5. LCI's Casino Employees Branch representatives
of the Transport and General Worker's Union, who have submitted
separate evidence, have also identified the potential damage to
existing businesses and jobs.
6. Regional casinos in town centres and
large centres of population would mean that any sense of their
being a need to "make a decision to travel to play Category
A machines" and to "control their proliferation through
accessibility" would be a myth—most people will be
able to walk to them!
7. The Secretary of State could not have
been clearer in her press statement of 14th June that it is Category
A machines that give her cause for the most concern. Lord McIntosh
has repeatedly echoed her remarks. The proposed policy denies
these machines to the small, controlled club environment of the
existing casinos—some of which may remain members' clubs
after the legislation—where customers are known and problems
are difficult to hide. Instead it offers them—in considerable
numbers, perhaps more than 50,000 machines—to the new Regional
casinos, which, by definition, will be substantially larger, anonymous
and run by operators new to the UK regulatory environment and
largely unknown to the regulator. We have direct experience of
running both kinds of establishment and can say from first hand
experience that exercising control in large premises is considerably
more difficult than in smaller operations. Once again, this seems
entirely contrary to the stated policy objective.
8. Moreover an anomalous situation would
arise in that long established, high stakes members' clubs in
London where customers are well known, would be constrained to
Category B machines, whilst a new regional casino opening, perhaps
just a mile or so away, could offer unlimited stakes and prizes
to any one of the thousands of anonymous customers who walk unchallenged
through the doors. It is also absurd that a player who is considered
to have sufficient self-control to wager very considerable sums
of money on a gaming table in one club should be considered in
need of protection from a gaming machine which is readily available
just yards down the road.
9. We are concerned that the new proposals
are so seriously anti-competitive that they will deliver a result
quite different from that expected from the proposals already
examined by the OFT and that they ought—if unamended—be
returned to the OFT for fresh consideration. That would cause
delay and is not an outcome we would welcome.
10. The government has indicated that the
new Gambling Commission might determine that Category B machines
in casinos "might have" different stakes and prizes
from Category B machines found elsewhere. That is welcomed, but
unless those stakes and prizes are indicated now, before enactment,
the existing industry is disadvantaged against the Regional casino—which
already has the certainty of unlimited stakes and prizes—in
constructing its business plans and determining investment. It
is also further disadvantaged against the betting industry which
continues to enjoy the benefits of tens of thousands of Fixed
Odds Betting Machines to which the public have ready access.
11. In Summary we believe that the latest
proposed measures fails in a number of ways:
11.1 Most importantly, they offer
no further or better protection to the vulnerable.
11.2 They do not deliver the kind
of gambling landscape we believe the government wants and expects
to see.
11.3 They fail to recognise that
the UK industry will not be able to fairly compete because is
not on an equal financial footing to foreign investors who have
for many years enjoyed much more liberal regulatory regimes and
have gained enormous financial strength in the process.
11.4 Against a background of UK
businesses operating for 35 years in a strictly limited environment
they perpetuate the inequality of opportunity through the imposition
of an unbalanced machine regime to the serious detriment of stakeholders
in established UK businesses.
RECOMMENDATIONS
12. There is much we could take issue with
in the detail of the proposals but we would draw your attention
to the more significant issues and offer the following recommendations:
12.1 Allow higher stake and
prize Category B machines
An additional class of Category B machines should
be created for Grandfathered and Large casinos with a £10
maximum stake and £10,000 maximum prize.
12.2 Increase the minimum size
of Regional casinos
The minimum size for a new casino should be increased
to around 10,000 square metres with a maximum of 5,000 square
metres of gaming areas (minimum of 40 gaming tables) and minimum
of 7,500 square metres of non-gaming and back of house areas.
This higher entry threshold will increase the minimum capital
investment required and significantly reduce the likely number
of Regional casinos thereby ensuring that they are of truly regional
significance delivering substantial regenerative benefits.
12.3 Allow limited Category
A machines in all categories of casino
All casinos should be allowed 50% of their machine
entitlement (based on the ratios previously recommended by the
JSC) as Category A machines, with an absolute minimum entitlement
of 10 machines. This would mean that, depending on the number
of tables, up to about 75 Category A machines would be allowed
in each of the 130 existing sites. In reality, an average grandfathered
casino with 18 tables would have only 18 Category A machines.
The remaining machine entitlement would be made up with a new
type of Category B machine. The proposal to maintain existing
jackpot machines is confusing and should be abandoned.
12.4 Increase the minimum size
of any new casino
The Small casino category should be abolished so
that all new casino licence applications must meet the Large casino
minimum size requirements thereby leaving three casino types:
Grandfathered, Large and Regional. Existing Grandfathered casinos
should be automatically allowed to relocate to Large casino premises
or to new premises as a Small casino.
13. We estimate proposals will result in
50% less Category A machines available than under government proposals;
fewer, but larger and better Regional casinos would open; Grandfathered
and new Large casinos would exist in similar numbers. Less than
6,000 new Category A machines would be permitted in the combined
Grandfathered and Large categories.
14. By allowing some Category A machines
in existing and Large casinos and abolishing the Small casino
category, the measures would give the incumbents a real opportunity
to invest in and develop the existing product, maintain high quality
premises and retain the popularity of town centre community casinos.
The government's objective of co-existence (of the "traditional"
and the new Regional casinos) and evolution would be met. It would
also minimise the possibility of proliferation from the conversion
of existing D2 leisure premises such as night clubs, health and
fitness centres, ten pin bowls and bingo clubs into casinos.
15. The Government's understandable need
to monitor the impact of Category A machines would rely on the
co-operation of existing UK operators, who have an impeccable
record of working alongside both legislators and regulators. Under
the current proposals, this co-operation will be required from
currently unidentified proprietors of new Regional casinos. Existing
operators would have no impact, as it already appears they are
unlikely to be granted Regional casino licences. There is already
clear evidence that developers and local councils are favouring
large international casino operators who have better financial
resources and experience of running large operations.
16. LCI reiterates and emphasises complete
support for measures that offer a safe and evolutionary gaming
industry. We are seriously concerned that these measures have
been miscalculated, that they are out of balance and that they
will seriously damage the industry that has delivered this opportunity
for change.
July 2004
| 
