Joint Committee on the Draft Gambling Bill Minutes of Evidence


Examination of Witnesses (Questions 1 - 19)

THURSDAY 1 JULY 2004

RT HON LORD MCINTOSH OF HARINGEY, MR ELLIOT GRANT AND MR GREIG CHALMERS

  Q1  Chairman: Good morning. We asked to be reconvened, and here we are. May I welcome again the Minister Lord McIntosh—actually, technically we are a new committee, but you are appearing before us for a third time—and Greg Chalmers and Elliot Grant from your Department who were also helpful in various ways to the Committee in our first inquiry. For the benefit of the large public gathering that is here again, I will go through one or two announcements before we start. First, this is a very narrow inquiry. We are looking only at casinos and, in particular, at regional casino policy, and we will endeavour to keep to that remit. Secondly, subject to the progress of our inquiry, we hope to be in a position to publish the report on the morning of 22 July, which is three weeks today. To do this, we will have to agree the report on the morning of Thursday 15 July, which is two weeks today. It is quite a formidable task for the Committee but no one has complained to the programme that we have outlined. We will be taking evidence next week from a number of witnesses from the industry, from a Minister from the Office of the Deputy Prime Minister, and also from our regional assemblies and people with an interest in the planning issues relating to this. The interests of the members of the Committee were well documented and remain on our website. Of course the interests in relation to this inquiry relate only to casinos, and I think the only interest which has been declared since we started is my declaration that since we published our last report I did pay a visit to a casino in Brighton—which was extremely helpful in preparation for the work we are about to undertake. A transcript of our evidence will be on our website within two or three days, just as soon as our witnesses and I have cleared the draft. Could I begin, Minister, by asking you perhaps to give an explanation of the significant policy change in your response to our first report. Would it be right to conclude that your new policy is really about enforcing scarcity, and that you perhaps now want to see a small number of large casinos rather than a large number of small casinos as originally envisaged in the Budd Report?

  Lord McIntosh of Haringey: Chairman, let me first of all thank you for inviting me back. I know you are a new Committee but I am relieved to see that there are some familiar faces here today. Thank you also for what you said about the timetable. It is of course important to us that we should have your report as quickly as possible and the fact that you have seen possible to do that before the Houses rise for the summer recess is very helpful indeed. In response to your question, no, I do not think so. It is not enforcing scarcity. I think we have to start from the fact that Category A machines, which have been labelled by the press as "jackpot machines", are completely new to this country. We do not have them at the moment. If we are going to introduce them, we have to do so with extreme care, until we know more about what the impact of them is going to be. I would say that our policy is to limit the accessibility of jackpot machines rather than to impose scarcity. The reason for that is fundamentally about protection. In your previous incarnation you have heard evidence about the anxiety people have and have expressed publicly—and witnesses have expressed it to you—about the risks involved with these machines. Our view is that the Gambling Commission will have, under the Bill, the powers it needs to address these risks, but nevertheless we want to take this gradually and we want to impose controls on the machines and restrict accessibility to them. Restricting these machines to the largest casinos means inevitably that there will be fewer of these in other categories because of the higher size threshold, so category A machines will be available in fewer locations than would have been the case under our previous proposals which means that most people will have to go further to a casino where there are category A machines. Having said it is about accessibility, clearly we will need to monitor the situation. We will have to assess their effect on participation and any impact on problem gambling. We do have the flexibility in the Bill to alter the entitlement, but, again, being cautious, we are minded to wait for the results of at least two prevalence studies before considering any significant alterations to the entitlements for the licensing regime.

  Q2  Chairman: How confident are you that this new policy will succeed in limiting problem gambling? Because you are saying that access to Category A machines will be by location—and we will come on to location later—but those machines will still be there, still available to people. If they are going to cause a difficulty, they are going to cause a difficulty wherever they are.

  Lord McIntosh of Haringey: The fundamental protection we have, as I have just said, is the Gambling Commission, the powers and responsibility, the duty, that the Gambling Commission has to protect vulnerable people—and protection of course is our motivation. The powers are going to apply to all products, not just any new products that come onto the market. In other words, they apply across the whole range of gambling and they can shape their regulation as evidence accumulates about the true causes of problem gambling. The new policy, as is clear, involves a limitation on the accessibility of the new Category A machines and it complements the powers that are already in the Bill. It is not filling a gap in the controls that are missing; you have to take it in addition to the protections that we have already put into the draft Gambling Bill and which you have already considered in your earlier deliberations. If you add those things together, yes, I think that is the motivation behind it, and that is the reason why we believe that we are moving in the right direction for the protection of vulnerable people.

  Chairman: In your response you accepted that there were in fact three types of casino. You have introduced this concept of a regional casino. Lord Faulkner wants to ask you about it.

  Q3  Lord Faulkner of Worcester: We talked about resort casinos and you are now talking about regional casinos. Perhaps I might ask you why you prefer the description regional rather than resort.

  Lord McIntosh of Haringey: Because I do not want to lay down the nature of the facilities that there will be in these casinos. Regional casino describes who will be responsible for making them possible; in other words, for deciding which areas are suitable for them. Resort somehow gives the impression of sun, sea and sex—which I do not think is quite what we want! There are all sorts of ways in which people enjoy themselves and we do not want to impose a pattern upon people who come to these casinos.

  Q4  Lord Faulkner of Worcester: Will the definition of regional casinos be contained in the Bill? Are you going to rely on secondary legislation?

  Lord McIntosh of Haringey: Yes. Clause 143 at the moment sets out the two categories which you rightly criticised. You said that we ought to have three categories and we have agreed with you, and so we will add the new category of casino licence for regional casinos to the Bill itself.

  Q5  Lord Donoughue: Minister, bearing in mind that the average size of casinos in other countries is much larger than the proposed total customer area here of 5,000 square metres, it is possible, is it not, that our minimum size threshold will not succeed in limiting the number of regional casinos? Indeed, our industry estimate that that number will be three or four times what, I think, the Department estimates. If there is a proliferation of regional casinos, how can you prevent a proliferation of Category A machines?

  Lord McIntosh of Haringey: I do not think it is our view that we are going to attempt to determine the number of regional casinos that we have. We are saying that there is a high threshold in terms of size, in terms of numbers of tables, and there is a new threshold, as you recommended—well, that is a limit at the other end—for the numbers of machines. But there is also a new requirement for a public non-gaming area, and that is very substantially higher than anything which Budd recommended, for example. The role of regional government in these matters is not to determine what the market should determine, the actual number of regional casinos which will be viable. The role of the regional spatial strategies will be to indicate the areas where they consider it to be suitable for there to be regional casinos. We are not taking part in any forecasting about the numbers. Our belief is that the higher thresholds will themselves form a limitation and that the identification of suitable areas will form a guidance as to where they should be.

  Q6  Lord Wade of Chorlton: Under the new proposals, the size requirement for table gaming areas is the same for both large and regional casinos. Does the definition not merely create another cliff edge, encouraging large casinos to be regional casinos and therefore risking proliferation of the regional casinos?

  Lord McIntosh of Haringey: No, I do not think so. The Committee was concerned with our previous proposals that large casinos, say of 38 tables and therefore 114 gaming machines, would only need to install three tables to get the right to unlimited numbers of gaming machines. You were worried about that and we took account of your worries, because it would have meant that a very small increase in space and tables would have lead to a massive increase in gaming machine entitlement. That is what you call the "cliff edge" I guess. But this is very different. The minimum size for a regional casino is now over three times the size for a large casino. It would mean a major expansion of a large casino to become a regional casino and that would of course need a new premises licence and it probably would need planning permission as well.

  Q7  Lord Wade of Chorlton: I am not sure that is entirely clear from your response to the Committee's question at all, Minister. Although the large casino definition (if we stick to the original definition, for ease of argument) was where we looked at 10,000 square feet—and you are now saying 1,000 square metres—on table gaming, no large casino is going to be restricted just to 1,000 square metres of table gaming. It would have significant floor space for machines and it would also have presumably restaurants, bars and other areas, all of which would require significant square footage. So when you compare some of the proposals that were being put to us as to the likelihood of some of the large casinos under which planning consent had been granted, we actually find that the amount of floor space is very little different from what you are proposing in your definition for a regional casino.

  Lord McIntosh of Haringey: We are requiring substantially more non-gaming public floor space from a regional casino than we are from a large casino. Clearly there are premises all over the country, existing premises, which would meet the large casino minimum requirements. I do not think there is a very large number of premises which would meet the regional casino minimum requirements.

  Q8  Chairman: The point is there may not be a requirement in the definition but the pragmatic outcome will be that any casino meeting the large casino definition is going to have significantly more than the required table gaming if it wants to have machines and if it wants to have restaurants and bars. I think the evidence we are beginning to get from the industry suggests that there were a number of large casino developments on the stocks which were not considering themselves to be a regional or resort or destination casinos (whichever word you want to use) but simply a local casino, but the size for which planning consents are being granted is overall equal to or greater than the overall size requirement in your regional casino definition. I accept there is a difference between what the Bill will require and what may be provided, but the suggestion that has been already put to us—and I think we will hear more of this next week—is that actually the resort casino threshold in your proposal has been set too low.

  Lord McIntosh of Haringey: I am interested to hear what you say about the evidence being submitted to you. Clearly the people in the industry or who are submitting views to you have their own views about what are viable business plans for different sizes and different configurations of casinos. I do not have that luxury. The last thing I can do is to speculate what people's business plans might be under certain circumstances. I cannot put themselves in my place. All I can say, as I said before, is that the difference between the minimum requirements for a large casino and the minimum requirements for a regional casino are very great and there is nothing like the threshold that you rightly criticised on our previous plans.

  Q9  Chairman: We could argue all morning about whether the threshold is at the right place.

  Lord McIntosh of Haringey: Surely. It is always inevitably a little bit arbitrary, is it not?

  Q10  Chairman: Yes. We will attempt that. I think that is what you would like us to do. But could we be clear that the objective of the policy is that the requirements for a regional casino will be significantly greater than you envisage a large casino providing.

  Lord McIntosh of Haringey: Yes, that is clear, but it must also be made clear that our objective is not to enforce scarcity. I said that in response to your very first question. Our motivation here is protection and the implementation of the motivation of protection is to limit accessibility—which is not the same thing.

  Chairman: We will come back to one or two of those points later but I want to keep to our agenda because it is easier for everyone.

  Q11  Dr Pugh: I have two questions. The first is about aggregation. How will aggregation work within the definition? Can the minimum size threshold for regional casinos operate over a number of premises?

  Lord McIntosh of Haringey: No. It is an established principle of planning law that a licence applies to premises. The ODPM people will explain it in more detail, but, to me, as a layman, we are talking about "in the same building, under one roof". It is a feature of policy about the non-gaming area that it should be easily accessible from the gambling areas or it could not perform its function of allowing gamblers/customers to take a break from gambling. I think that means it has to be in the same building. Whatever else people do in buildings outside, whether they have hotels or restaurants somewhere else in the same area, is up to them.

  Q12  Dr Pugh: So you have to go with the threshold, with it all under the one roof.

  Lord McIntosh of Haringey: Yes.

  Q13  Dr Pugh: That is the essence of the thing.

  Lord McIntosh of Haringey: Yes.

  Q14  Dr Pugh: Could I ask you a second, unrelated question. In your differentiation between regional and large casinos, has any research been done by the Department into the varying client bases for these sorts of premises; in other words, of the sort of people the regional casinos will attract rather than, for example, the large casinos?

  Lord McIntosh of Haringey: No, not in the Department, but research came my way only within the last few days from the United States of the profile of users of very large casinos there as compared to smaller casinos.

  Q15  Dr Pugh: What broadly does it show?

  Lord McIntosh of Haringey: It is true that they are very different. I do not have it at my fingertips. I will gladly see that the Committee does have a copy of it.

  Dr Pugh: That would be useful. Thank you.

  Chairman: That would be very helpful.

  Q16  Lord Mancroft: Minister, we all agree with you, I am sure, that protection is one of the most important things. Going back to the beginning of this, I think everybody is agreed that the existing casino industry in this country was very well regulated, did not have problems, and was an industry that we could be proud of. But the evidence we are getting already from the existing industry is that the impact of your proposals now is not going to be, shall we say, very helpful to them. Do you not think those proposals are unfairly balanced against the existing industry?

  Lord McIntosh of Haringey: I think what we are proposing—including both what we proposed before and what we are proposing now—is an enormous opportunity for the existing casinos in this country. It could create a more dynamic and more competitive consumer sector; it can provide more scope for casinos to innovate, more scope for them to meet consumer demands. But let's go back to what has not changed in our policy: the demand test is going; the membership requirement is going; the enforced 24-hour waiting is going; the ban on advertising is going. Casinos will be able to provide betting; large and regional casinos will be able to provide bingo; and casinos will not be limited to the games spelt out in the statutory instruments as they are now. The Gambling Commission can give agreement to more. These are all new freedoms for anybody who wants to start casinos large and small and they are all interpreted in different ways. I can imagine that some casinos would want to stay as members' clubs; some of them will not be interested in having machines at all; others will develop as part of wider entertainment complexes. There is no unfairness in this. It is the commercial judgment of the current operators, whether they are in this country or anywhere else. There is no difficulty for people in this country having access to capital for good investments. I cannot see that there is any unfairness in what we are proposing.

  Q17  Lord Mancroft: Certainly the existing industry, as it is, will not be allowed to have Category A machines and any new industry will.

  Lord McIntosh of Haringey: But they do not have Category A machines now. It is not that new businesses running casinos have any advantage over existing businesses running casinos. The Category A machines in regional casinos will be available to applicants whether they are in the existing casino industry in this country or elsewhere. That is surely the right way to proceed.

  Q18  Lord Walpole: So you think the new small and large casinos can be viable businesses under the Government proposals.

  Lord McIntosh of Haringey: We would hardly have set up a regime of this kind if we thought they were not thought to be. But it is not our view that matters; it is the market's view that matters. The role of Government in this matter is to give the regional bodies the power, indeed the obligation, to decide whether or not there are suitable areas in their region for regional casinos. It is for the market to decide what businesses do well and what business models do well; it is not for us to decide. There is nothing that makes it impossible for a new casino, operated by somebody already in the business . . . Remember, the people in the business here have the expertise, they know how to operate in this country, they have inevitably an advantage over anybody coming in, and they can have a casino with a mixture of casino games and betting and general entertainment. These matters have to be tested in the market place; they cannot be laid down by Government.

  Q19  Lord Walpole: Minister, of course you are quite right, it is for the market to decide and always will be. Do you think that is why the share price of the existing casino industry fell so markedly after your last response?

  Lord McIntosh of Haringey: I never comment on share price changes.


 
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