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UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE To be published as HC iii HOUSE OF LORDS House of COMMONS MINUTES OF EVIDENCE TAKEN BEFORE JOINT COMMITTEE ON THE DRAFT GAMBLING BILL
DRAFT GAMBLING BILL (REGIONAL CASINOS)
Tuesday 6 July 2004 VISCOUNTESS COBHAM, MR JOHN KELLY, MR ANDREW HERD, MR ANDREW LOVE and MR DAVE ALLEN
MR LLOYD NATHAN, MR PETER BACON, MR ANDREW TOTTENHAM, MR TOBIN PRIOR, MR RODNEY BRODY and MR STEVE EISNER Evidence heard in Public Questions 172 - 311
USE OF THE TRANSCRIPT
Oral Evidence Taken before the Joint Committee on the Draft Gambling Bill on Tuesday 6 July 2004 Members present: Mr John Greenway, in the Chair Witnesses: Viscountess Cobham, Chairman, British Casino Association, Mr John Kelly, Chairman, Gala, Mr Andrew Herd, Chairman and Chief Executive, Westcliff Casino Group, Mr Andrew Love, Chairman, Casino Operators' Association (UK), and Mr Dave Allen, Chairman, A&S Leisure Group, examined. Q172 Chairman: Good afternoon. Can I begin by welcoming three familiar faces to the Committee and two new ones? Viscountess Cobham, the chairman of the British Casino Association, John Kelly, the chairman of Gala who appeared previously as a member of the Cross-Industry Group, and Andrew Love, the chairman of the Casino Operators' Association in the UK. We have David Allen, chairman and chief executive of A&S Leisure and Andrew Herd, chairman and chief executive of Westcliff Casino Group. You are all very welcome. You will note there are cameras on the walls and we are being filmed. Gideon Hoffman from the Bill team is present at the meeting if required to clarify something. We were very grateful for Greg Chalmers's presence this morning when he was able to clarify two important points of detail. The transcript of the meeting will be produced and placed on the internet before the end of the week. A full declaration of interests was made at the beginning of the first meeting and that information is available. Can I also ask you to note that we have five witnesses in this first session and six witnesses in the second session, which is rather a large number to get through and we will be here until seven or eight o'clock if everybody tries to answer every question. Please only answer in addition to an answer that has already been given if you have something additional to add to what has already been said. Brevity from us and from the witnesses would also be helpful. The government has made some major changes to the policy proposed under the draft Bill. Would you like to tell us how the new proposals affect the casino industry? Viscountess Cobham: I think it is fair to say that the whole of the BCA would like to see a new, dynamic modernising Gambling Bill take place as soon as possible. Our submission suggests some ways in which we might help the government achieve their stated objectives, with which we entirely agree, which are providing protection for the vulnerable, controlling proliferation and encouraging regional investment. We do not agree that the way in which it is proposed at the moment is absolutely the best way and we have suggested a few amendments to that to help the government achieve their objectives. I hope you will not think it self-serving of us to say that all of us have been involved with the industry for very many years - indeed, since the 1968 Act - so I hope the Committee might agree that the industry has provided the background against which the government might look at modernising and expanding the industry. It would be fair to say in direct answer to your question that the proposals as they stand at the moment would quite considerably affect the industry and certainly put a quite different balance to that which we were talking about when we last gave evidence to you. A number of your witnesses this morning suggested there might be some 45, or thereabouts, regional casinos which was perhaps rather larger, if not much larger, than certainly many of us thought when we were talking about a destination casino. There is considerable agreement that the impact of the proposals as they stand at the moment would have a considerably damaging effect on a significant number of existing operations. That in principle has come from a quite unlevel playing field. A consequence of that is a dramatic increase in the number of gaming machines that might be in existence, particularly potentially up to 50,000 category A machines in casinos across the United Kingdom. Finally, the investment in casinos will come almost exclusive in regional casinos because of the difference in the product offers that will be available in the different categories of clubs. Mr Love: You have received the COA submission. That lays out our position as we believe it. It does endanger, in our view, the profitability of some of the smaller or provincial casinos and overall we consider it to be too big a change from where we were before. Q173 Chairman: Do you think the government has now resolved the issues that were left undecided in the draft Bill at the time of our report, in particular, grandfather rights and the mechanisms, which are what we are really interested in in this inquiry, for defining and deciding the location of the largest casinos? Viscountess Cobham: Most of the issues have been resolved but I would suggest to you that it is a great sadness that, having had four years of what has been in my view commendable consultation, there has been absolutely none since we last spoke to you. That has resulted in the industry being astonished by some of the proposals that appeared in the Department's response to your report. Q174 Chairman: Can I make two points to clarify where we finished up this morning? First, Mr Chalmers on behalf of DCMS confirmed that it is the government's intention that there should be on the face of the Bill a regional casino licence. This suggests that there ought as a consequence to be some mechanism therefore of controlling the numbers. The number 45 arose from the fact that both the witnesses representing regional planning bodies talked about potentially five regional casinos in their region. If you count London and the south east as a separate region, that comes to 45 if there are nine regions. We also talked at some length about the question whether a regional casino should have a separate planning use category and we will be questioning the Minister about that. Would it be fair to say that your concern might be less pronounced if some mechanism could be devised to limit the number of regional casinos? Is it the risk of there being as many as 40 or more which brings in the concern about competitive disadvantage? Viscountess Cobham: To some extent, yes, but when addressing the issue of proliferation I know that the government are anxious to control that and indeed so are all of us. The view at the moment is that this is to be controlled by the quality of product - i.e., the difference between category A and other types of machines - and by what can only be described as an unlevel playing field at the moment with only category A machines and regional casinos. 45 fits with about what we put in our submission. If there are that many spread across the country, almost inevitably the competition will be considerable between both the category A machines and the rest. On one hand, obviously we are entirely in favour of having a mixed offering in this country and I am sure I am sitting at a table where others will not only wish to encourage and enhance their existing estates but will also invest in larger site casinos. What we are keen to ensure is exactly what the government put in their response to you, which is that there is a twin tracking of allowing the existing clubs, about which there has not been huge criticism - or indeed, I might suggest, any - alongside the development of the largest casinos, the regional casinos. It is that level playing field that we are looking for. We are not saying, "Not in our back yard" at all and I would not wish anyone to think that we were. Q175 Lord Faulkner of Worcester: In view of the fact that you dislike the government response to our report so much, would it be right to say that you would rather have no Bill at all as opposed to the Bill which we are likely to get if the government proceeds with a Bill based on their response? Viscountess Cobham: It is a difficult answer to give in that, as I opened by saying, I think we would all like to see a dynamic, new Bill which encompasses the whole sector in a productive manner that is a good Bill, good legislation. I am sure I speak for everybody. We would like to see the right Bill moving forward as speedily as possible. Q176 Lord Faulkner of Worcester: If you do not get the right Bill, would you rather have no Bill at all? Mr Kelly: We have all along, for five years or more now, been very committed to the new legislation. We would all be deeply disappointed if the legislation that emanated from this long consultation process was as flawed as we consider it might be, given the proposals that are currently in front of us in the DCMS response. Our absolute focus at the moment is on trying to ensure that we do have an orderly expansion of the market place and that the industry plays its part in trying to outline as much as it can what the implications of the proposed legislation might be. However, to be even more direct with you, legislation and new legislation is absolutely critical to this industry for a number of reasons and I would be enormously dismayed if we resulted in no legislation as opposed to legislation which may not at the end of the day in any case suit anybody's purpose. Q177 Lord Brooke of Sutton Mandeville: For safety's sake, I should declare again I am a small shareholder in London Casinos International and the Rank Group. Given the number of changes the government made in the licensing legislation over a four year period before they introduced it, do you regret now not having made some of the suggestions which you are now making at an earlier stage in the process? Viscountess Cobham: To be frank, I thought that as we worked through the consultation process we were moving along in the right direction. I felt my members were content with the direction. Nobody gets exactly what they want and we are all realists. We have recognised the government's objectives and we hope that we have been working along with them to the benefit of the industry as well as achieving the objectives laid out by the Department. No, I do not have regrets at not having put forward some of the things that we have put forward now because the playing field has altered quite dramatically as we have moved along. We are the creators of the legislation so we have had to work with it. Q178 Lord Brooke of Sutton Mandeville: Given some of the problems which were uncovered by the pre-legislative scrutiny committee in its earlier report, had the likelihood of those problems been unearthed not occurred to your sector of the industry in advance? Viscountess Cobham: We thought you had done a rather good job, if I may say so. We were reasonably content in broad terms with what you put forward. Mr Love: Can I comment on the question Lord Faulkner put? I find it particularly disappointing that an industry that has served the country so well since the 1968 Act, by and large, has been in a sense turned upside down and any commercial advantage will change from the existing operators, albeit that they have the opportunity of going into new regional casinos. They will not be able to compete on the same terms, whichever way you look at it, because they do not have the same opportunity. I think that is a very unfortunate part of the new June Bill. Q179 Lord Faulkner of Worcester: You would prefer to have the status quo and for this Bill to be abandoned? Mr Love: No, I would not. We have stated that there is a need for constructive change, not necessarily absolute change. It is how it is dealt with and how it is put through that becomes important. We all have said that it is necessary to amend the 1968 Act. I do not think anybody would disagree with that. It is the speed and the manner in which it is dealt with. Q180 Lord Wade of Chorlton: Has the government in your view got the definition of regional casinos right? Do you think the minimum size threshold will succeed in limiting the proliferation of regional casinos? Viscountess Cobham: We do not believe that the balance currently is right. This is not just because of the definition of a regional casino. It is the definition in relation to other casinos. Therefore, in our submission to you, we have made some amendments to the government's response to your report which notably are, firstly, to suggest an increased size of regional casinos which might achieve the same objective as some of the points that the Chairman made earlier. We have suggested increasing the barrier to entry, so to speak, from 5,000 square metres to 10,000 square metres. We have recognise the concerns that the Department express about the potential numbers of outlets and this, to a certain extent, responds to Lord Brooke's point. We were addressing ourselves to the overall number of category A machines but in response to the number of outlets we have suggested keeping the small category of new casino in reserve for the time being, therefore allowing new entrants only at the level of the large casino. That addresses a lot of the concerns, I believe, of conversions of nightclubs or bingo halls. We did agree with the implications, if not the actual recommendations, of your report that the ratio of machines per table should be 3:1 and 8:1. We have suggested that there should be a 50 per cent ratio of category A machines to other categories of machine in all casinos. This would in effect reduce the overall number of category A machines so they could be monitored across the board. We have suggested permitting category B machines to have increased stakes and prizes to, say, £10 and £50,000. Q181 Chairman: Your view is that the barrier should be higher? Viscountess Cobham: Yes. Q182 Chairman: Your Association agrees, Mr Love? Mr Love: We do agree, yes. Q183 Jeff Ennis: Does the new definition of regional casinos merely create another cliff edge? Will the restriction of category A machines to regional casinos encourage the proliferation of regional casinos as against large casinos? This is going back to the point about trying to create a level playing field. Viscountess Cobham: I would suggest that it does create another cliff edge because in summary we would suggest that only significant investment would go into regional casinos because of the imbalance in the product and there would be very little investment in the existing estate. Q184 Chairman: The sizes which are set out in the schedule on page 29 of the government's response say that the minimum table gaming area for a large casino would be 1,000 square metres, which roughly equates to 10,000 square feet, and the same for a regional casino, 1,000 square metres. The difference is that for the large casino there is a lower, minimum non-gambling area and a minimum total customer area which is smaller. I would be particularly interested in the view of the operators of the casinos now. If you have 1,000 square metres of table gaming, what size of casino overall, in respect of public space, would you be looking for in a large casino? Mr Kelly: What you are requesting is a view on what the gross size footprint would be? Q185 Chairman: Yes. Is it not likely that all the practicality in terms of space for machines, space for bars, restaurants, entrances and so on, public areas, means that you would still end up with a fairly sizeable casino with a large casino that may not be much smaller than the definition of a regional casino? Mr Kelly: No. I take your point entirely. However, we have calculated that you probably need about 6,500 square metres of absolute footprint to accommodate what we perceive to be the definition of a regional casino as per this document, in terms of the total footprint of the casino. The point we are making is that the entry point in order to do that is relatively low, so I think I am agreeing with your point that, relative to the sizes of other casinos, this is not significantly differentiated. In order to justify the whole product offer issue that is at the heart of our view of the lack of competitive ability between this and existing casinos and large and small casinos, or large and grandfather casinos as they would be, that differentiation needs to be significantly larger. I am agreeing with the point that you make. Q186 Chairman: Is it also the case that, if it was left just to the market, your answer to Mr Ennis is that there would not be any large casinos; they would all be regional casinos? Viscountess Cobham: Yes. Q187 Chairman: I remember on your first visit there would not be any small casinos; they would all be large casinos because under the government's original proposals it gave an entitlement to as many machines as they liked. There has to be another mechanism other than the market because otherwise there would be proliferation. Is that your view? Viscountess Cobham: Yes. Mr Allen: Some time ago we were talking about resort casinos and we genuinely thought that there may be five or six on a trial basis to see how they went. We were pretty content with that, but now we have moved from resort casinos to regional casinos without any debate. I believe that what you have just said is correct. There will be very few, if any, large casinos. There will be regional casinos. Whether there is enough market for regional casinos and how many I do not know. No one knows. Whether they will make a profit nobody knows. The one thing we do know is it will damage the existing industry. At the end of the day, we could go five years and find out that none of us is making much profit and there will be very little investment. That is the reality of the situation. Q188 Chairman: I appreciate my questions are slightly leading and might not be permitted in a court of law, but I want to be absolutely sure what you are saying. If there were only five or six or even double that number of regional casinos, you would not have such a problem. Mr Allen: No. Resort casinos, not regional. There is a massive difference. Resort casinos are on the coast. Regional casinos you can implant where there are casinos already existing. They will have an impact but whether the impact will be enough to allow the regional casino to make profit I do not know. I do not think it will. I will be quite honest with you. As a private operator with six casinos, we have the ability to open a regional casino where we want to but I would not do it because I do not think it is going to work and I have 32 years' experience in the business. Mr Herd: Chairman, you must be right. Since the adverse impact on our estate of regional casinos will be proportionate to the distance between the regional casino and our estate, the fewer regional casinos there are the less the adverse impact. Q189 Chairman: The conclusion from this exchange is that there has to be a robust mechanism other than the market to limit the number of regional casinos. Whether it is a combination of various devices or not, your anxiety is that, on your reading of the proposal, we could end up with 40 to 45 regional casinos and virtually no other new casinos. Viscountess Cobham: Yes. Mr Allen: That is correct. Q190 Viscount Falkland: Can you tell us if and how you see aggregation applying here under the definition? For example, would you see the minimum size of threshold for regional casinos operating over a number of premises or would you see it as requiring everything to be under one roof? Viscountess Cobham: We were expecting that it would be "under one roof" and the benefit of that would be that the benefits to a community, to a place, would obviously be much easier to negotiate and the control mechanism would be easier. We were expecting it to be in one ownership, under one roof. Mr Allen: Anything else would be unacceptable. It has to be under one roof. Chairman: After our exchange this morning with representatives from Blackpool, I do not think it is quite an issue. When we went to Blackpool, Blackpool were suggesting that they would like a resort casino which, in their definition, meant four or five different premises but I think this morning their expectation was that each one of them would be the size of this, so that would be okay. Q191 Lord Faulkner of Worcester: Who should take the decision as to where the regional casinos are located? Should it be the regional planning bodies as the government is proposing or would you rather there was a central government decision like it is in France? Viscountess Cobham: If it does not sound too tricky an answer, I think it is a question of which I would like notice and further consideration. I am quite clear that local authorities should play a significant role. They are our elected representatives but, as we understand it at the moment, the government's view is that the regional planning bodies will produce their spatial plans and they will have chosen areas. They will have a strong influence over whether they are called in but as to whether it should as an alternative be central government, unless any of my colleagues would like to say differently, perhaps we could give some consideration to and come back to you on. Mr Allen: Is there any difference at the end of the day? Q192 Chairman: I am content to put that question to the Minister on Thursday morning. I suspect he will say that there is. The government's view appears to be that the regional planning body can decide what its regional, spatial strategy is and, if the proposal is in accordance with that, it would be unlikely to be called in. Mr Allen: If it conflicted it would be called in, so is there a difference? Chairman: I hear what you say. Q193 Lord Mancroft: Lady Cobham, when you gave evidence to our last inquiry you said you expected there to be about 240 to 250 casinos, given the provisions in the draft Bill as we saw it then. I think I know the answer to this but do you still hold the view that the government's latest proposals are likely to change the development of the casino industry? Viscountess Cobham: It is difficult to be clear about absolute numbers. Therefore, what has changed is the balance between a more spread development of the industry to it being loaded almost exclusively on the regional casinos. We have already shared differences on numbers of regional casinos and no doubt our colleagues following on after us will have views on this as well. I would not have a definite view over whether the absolute numbers have changed, but I am clear that the balance within that has changed considerably. Mr Kelly: One thing that is very clear in our view from the proposals as they are currently constructed is that they will change fundamentally the structure of the existing casino market. I do not think there is any doubt about that at all. That is by two mechanisms, one being the proliferation of regional casinos of 6,500 square metres and upwards because of the relatively low barriers to entry and the impact that their ability to have a different product offer to the product offer in all other casinos will fundamentally change the structure of the market. How that will impact on absolute numbers is very difficult to gauge but there is absolutely no doubt at all that a significant amount of the existing casino stock in the UK has been in place with reasonably consistent numbers since 1970, when the 1968 Act came into being. There will be a significant number of those casinos. Where they operate within the market place of a new regional casino with a different product offer will be a very significant threat. Q194 Lord Walpole: Why do you think the proposals are unfairly balanced against the existing industry? Viscountess Cobham: We have given the answer in reply to some of the other questions. It is fundamentally because of the difference in category A machines and all others. One might interpret your question as to why has this change been proposed. I think I understand that the government wish to control the number of outlets, but I would suggest it is quite as much controlling the absolute numbers of category A machines. What we are now looking at is very much a two tier system whereby the regionals are in one bracket and everybody else is in a quite different bracket. It is quite wrong to suggest that a smaller operation is more difficult to regulate than a much larger operation. I can see no basis for that whatsoever. I would suggest that in the four and a half years I have been chairman of the BCA our relationship with our regulator has been exemplary both ways. I have never met a better relationship with a regulator. I therefore cannot see any foundation for suggesting that larger operations are easier to regulate. Principally, the answer to your question is the difference in the variety and type of machine in the product. Q195 Lord Walpole: Even an existing casino with its grandfather rights is still disadvantaged? Viscountess Cobham: Hugely. Mr Allen: It is very important that we have a level playing field. I think Lord Mancroft asked how many do we see. It is about 140 and there are a few in the pipeline, so say 150. If we are to have 45 or 50 regionals, I am not saying we should be protecting the existing casinos but we have to be able to compete on a level playing field and that goes to these category A machines. If the large casinos are going to be able put them in, we have to be able to put them in. You do not have a supermarket selling milk and stopping corner shops selling milk. If we are going to have an open, free market, it has to be one where we all compete on level terms. Mr Herd: The effect of the proposal, it seems to us, is degrading a commercially attractive stream and a less commercially attractive stream. The entire fundamental of our case is that the balance between those two streams is wrong. That in essence is our problem. What Lord McIntosh said was that British operators are free to move from the unattractive stream to the attractive stream but in practice that is extraordinarily difficult to do. What we would like to see is a level playing field for all of us so that we can all compete within one stream. Q196 Mr Page: The question I want to ask has been trampled over, covered and referred to in so many ways, sometimes direct and sometimes oblique, but I want to ask you a fairly direct question. I do so because the British Casino Association said, "The government's proposals would create a situation where virtually all new investment would go into regional casinos, thereby threatening the survival of existing casinos." The Gala Group goes a little further and says, "Such would be the competitive advantage enjoyed by regional casinos compared to small, large and grandfathered sites, that only regional casinos would be economically viable." Mr Kelly just said, "A different product offer would be there." Do you think that new and small casinos would be viable businesses without category A gaming machines? Viscountess Cobham: I think I can answer the question and then hand over to the operators. Q197 Mr Page: I hope you get five out of five. Viscountess Cobham: In broad terms, they are going to be, all of them, significantly affected, some more than others, by the impact of not having category A machines. Q198 Mr Page: That is a political answer. "Viable" is the word that it is all hinged on. Would they be viable without category A machines? Mr Kelly: Where a small casino is in direct competition to a regional casino as perceived in these proposals, which has category A machines and no category A machines are enabled whatsoever in a small casino, I very much doubt the ability of that small casino to compete viably. Mr Allen: I agree. Mr Love: We agree. Viscountess Cobham: I agree. Mr Herd: I agree. Q199 Chairman: If I understood your previous answer correctly, your anxiety about this and the degree of certainty with which you would give such an answer are directly related to the number of regional casinos that are allowed to develop. To take Mr Allen's point, if there were only half a dozen in resorts, you would have much less concern. There could be other new, large and small casinos? Mr Allen: Might that not be better for the whole of the industry, government and everyone? We would then get some test cases because no one knows whether these regional casinos are going to be viable. My own opinion is that they will not be viable because they will rely on a slot business and we do not have a slot culture in this country. In my opinion, I do not think we ever shall have a slot culture. They will damage the existing industry whilst finding out whether they are going to be economically viable. Viscountess Cobham: The reason I gave what Mr Page described as a political answer is precisely because of the answer John Kelly gave, which is if you have a large number of regional casinos the level playing field, where those are existing, is what will affect it. There may be some - there probably will be, even with 45 - which will not have competition of an unfair nature. It is where it is in direct competition with an unlevel playing field that makes the impact so huge on any existing operation. Q200 Lord Donoughue of Ashton: Coming again to the comparative disadvantage issue, what are your views on the new gaming machine to table ratios for small and large casinos? Do you think restricting category A machines to regional casinos is an appropriate way of preventing proliferation? Viscountess Cobham: We agreed with the suggested ratios that you put forward in your submission to the Department and we have not fully grasped the logic of moving from those ratios. We have suggested that to control the overall number of machines 50/50 As and other sorts of machines would be more appropriate and would be a way of preventing such a very large number of category A machines in the first wave. Q201 Lord Mancroft: What proportion of a regional casino's gaming machine entitlement would you expect to consist of category A machines? Viscountess Cobham: We have suggested in our submission - and indeed I think the departments have been considering this -- that a review of the stakes and prizes in category B machines might be given consideration. Therefore, it is difficult to know the breakdown of A machines and other machines until we know what those stakes and prizes might be. It is difficult to guess that because, as I understand it, when Lord McIntosh gave evidence, he suggested that that would be a matter for discussion between the Gambling Commission and the Department in due course. Q202 Chairman: What the Minister told us last Thursday was that the explanation for the policy change was that it would result in there being fewer casinos offering category A machines. The number would now be smaller than it would have been under the original policy or under what we recommended the government should do. If you remember, before, we were talking about the number of casinos doubling, a few small ones and a lot of large ones, and we were not sure about the third category but they would all have the entitlement to category A machines. By limiting the category A entitlement in regional casinos, even if you end up with 45, that is a third of the number of casinos that would have had category A machines under the previous proposals. You see the thought process? Viscountess Cobham: I see the thought process but what is quite difficult to get one's mind around is that one might think that implies that small casinos are harder to regulate than large ones, and I see no evidence for that; and that it disregards the total number of machines and merely the number of outlets. Thirdly, the assumption is that the regional casinos would be as we were describing earlier, destination, resort developments; whereas the proposals as we read them at the moment would probably develop regional casinos in most large, urban environments. Q203 Chairman: The local authorities were competing with each other this morning as to whether they would be in Birmingham or Manchester. Viscountess Cobham: One only has to look at the number of applications that have already been made to see the pattern of things to come in terms of location. Q204 Chairman: There are two or three questions which follow from this discussion, from what we have already been told and also from your answers. Firstly, are we right to think that category A machines are more dangerous and potentially addictive than other machines? Mr Allen: All machines are addictive. They are the biggest form of addiction. At this moment in this country we have perhaps 1,200 machines. With this Bill we are going to end up with 30,000 or 40,000 machines. Does that answer your question? Q205 Chairman: To some extent but I am thinking particularly about category A as opposed to category B. Is it really necessary to have defined in regulations unlimited stakes and unlimited prizes? Is not the reality that there would be a natural limit of some kind and is there a danger that, in talking about category A machines with unlimited stakes and prizes, we may be describing a problem which in reality does not actually exist? Mr Kelly: I do not think there is any evidence whatsoever that unlimited stakes and prizes machines are any more or less addictive than any other form of machine which pays out in cash. Any of the evidence coming from any of the other jurisdictions that have long histories of operating these machines is that addiction to machines, which is relatively small, but where it does apply, is because the machine pays out in cash, not because the machine pays out an unlimited amount of prize in cash. I see no evidence whatsoever anywhere that unlimited stakes and prizes machines are per se, because they offer unlimited stakes and prizes, therefore addictive machines. It is an extremely dangerous supposition to make that because there happens to be a different limit on stakes or prizes therefore it is going to allow people to vacillate more towards those who have a compulsive disorder in playing machines. I just do not think the evidence suggests that. Mr Herd: If the danger flowing from the machines was the primary concern, I would expect to see much more reference to things like spin speeds, to mechanisms for payment, ticket in, ticket out, debit cards, recharging smart cards, use of credit cards, things like pre-determination of playing periods, pre-determination of stake limits and so on. I see none of that. Instead, I see a very arbitrary distinction between a modern, open, flexible, easily available type of machine which we might all want in our estate and a much more restricted, limited category B type machine which fundamentally we do not want. Q206 Chairman: This suggests that these machines are more attractive to regular customers rather than new ones or problem gamblers. Have I understood your answers correctly? Mr Kelly: The evidence is extremely hard to land on here. I am completely unconvinced. We have done, as I am sure you would expect us to, a huge amount of work in terms of other jurisdictions that have these types of machines. They have had them for a long time. It is all about the control within the environment. It is all about the accessibility of these machines. It is about the conduct of the operators, because the conduct of the operators does have a part to play in that, not necessarily in the type of machine that is available - otherwise, Andrew's point would be made - but there would be more controls mechanisms in place rather than a number of accessibility mechanisms. Q207 Chairman: In that case, would you be prepared to contemplate maintaining member only casinos if that gave you access to category A machines in existing casinos? Mr Love: To be fair, why should the existing casinos be differentiated from any new casinos by having that obligation placed upon them? It goes back to the answer of the level playing field again. Why should we have the imposition of having to have membership when others do not? Q208 Chairman: I am not suggesting that you would be required to have membership. I am simply raising a question. Given that a number of operators have indicated that they may wish to maintain member only casinos anyway, if that avoided the problem of people walking in off the street and suddenly finding themselves exposed to category A gaming machines, and that gave you access to those machines, would that in some way solve part of the problem? Viscountess Cobham: Whilst respecting Andrew's answer to you, I would say that probably in principle the answer is yes. Q209 Chairman: What about the operators? Do you have a view? Mr Herd: It gets back to the level playing field issue. If we were allowed category A machines in return for keeping membership entitlement but could give memberships immediately, that would be fine, but we would still be unable to compete if down the road there was a regional casino which could offer the same facility without needing to identify people in order to take them on as members. Mr Allen: We must have this level playing field. Q210 Lord Mancroft: I think we have a vague idea of what you perceive the problem with the government's proposals or response is. Is the solution that the existing casino industry should have access to category A machines or is the alternative solution that there should be a restriction on the number of regional casinos or is it a combination of both? Viscountess Cobham: I think it probably is a combination of both. Ad nauseam, we have gone round the track of a lack of level playing field. We certainly acknowledge the government's concern about the number of outlets and we suggested as a consequence of that raising the barrier to entry to the large casinos and having no new, small casinos for the time being. That does address 126 or 130 becoming 326 or 330, which I acknowledge might be concerning. The answer to your question might be a combination of the two. Mr Kelly: One thing that is quite important is to focus not only on the competitive issue which we have been talking about. I think it is perfectly reasonable and fair for an industry that has already established its credentials over a number of years. However, it is also absolutely directed at the heart of the point you were making: whether we believe these proposals will meet the government's fundamental objectives. At the moment our view is that they will not. The government's objective of ensuring that there is the least amount of social damage as a result of any new legislation that comes out is one that the BCA and I am sure we would all absolutely buy into because we have no iota of interest as an industry in being connected or related to difficult, critical social implications. Our activity and our conduct in that regard have been good. One of the measures that we are using in trying to put forward some constructive proposals through yourselves is exactly that. Yes, there are competitive issues at hand but equally is this going fundamentally to deliver what we perceive the government's objectives to be. Our view is that it will not. Q211 Lord Mancroft: Why? Mr Kelly: Because it will result in a proliferation of category A machines. It will result in more regional casinos than anybody had originally envisaged. The availability and accessibility for those regional casinos will be quite considerable. It will not be like the resort casinos where you would have, under the original proposals, to drive in and stay there. We were quite content with that. If you have, let us say, four or five regional casinos in city centres, in the English planning areas, there is absolutely no doubt that the accessibility of the products they offer is going to be relatively easy. The barriers to entry to the consumer will be relatively easy. That is fine provided the controllers are implanted and there is not a proliferation of that number of casinos and the existing industry, which does and has behaved responsibly, can play its part in ensuring that those social implications do not become critical as a result. Q212 Viscount Falkland: It seems from your response today that you are pretty consistent that it is the level playing field which is the main problem. Could there be a solution in some way initially, when we move into this new casino era, of not having unlimited jackpot machines but having high jackpot machines which are able to be included across the level playing field, leaving it up to the Gambling Commission and future legislators to review that from time to time? It seems we need to get off the starting blocks here. Otherwise this unlevel playing field is an insuperable problem at today's date. Mr Herd: The difficulty with addressing that question is that so much depends upon what staking and prize limits one might substitute for unlimited prizes. Q213 Chairman: Make a suggestion. Mr Herd: As Mr Kelly said earlier, it is difficult to get evidence on these subjects, but the anecdotal evidence is that keen gamers on the whole are not that interested in machines which have a very large jackpot. They tend to be more interested in a reasonable size of jackpot that pays more frequently, perhaps as one might expect. Therefore, one could say that having unlimited stakes and prizes is not critical to the economics of the business going forward. On the other hand, it is quite clear that in the early stages of a deregulated industry the excitement and the attraction to the customer who is receiving those very high jackpots could be an interesting and important part of building the business, as it was with the lottery, for example. The answer is we do not really know. Q214 Viscount Falkland: Half a loaf would be better than none if it came to the crunch? Mr Herd: The level playing field is what is most important. Q215 Mr Page: I am now a little confused. You gave me a very simple answer which I could grasp: five nil. Now Mr Herd is saying that gamblers are more interested in machines that pay more frequently, without the big pay-outs, but at one moment you were saying that the big pay-outs are necessary and the small and larger casinos will not be viable businesses without category A gaming machines. Where are we on all of this? Mr Herd: My understanding of the staking and prize limits proposed for category B machines is a below the threshold, jackpot pay-out that even the most die hard, probability focused, regular gamer might look to achieve. Q216 Chairman: The Minister said that it was possible to have in the regulations different stakes and prizes for category B machines for different kinds of gambling premises. By implication, you might have higher limits in a casino than in a bingo club or an adult gaming centre. This we see is likely to happen anyway with fixed odds betting terminals. We are perhaps flogging a dead horse here. You clearly want to stick admirably to your line of a level playing field but in the practical reality of the government setting its face against category A machines in any casino other than new, regional casinos, what is the way that you can make the best fist of it? That is why we are asking the questions that we ask. That is what lies behind Mr Page's question. Higher stakes and prizes for category B machines might be part of the solution. I do not know. Viscountess Cobham: We have put forward our best case and we must leave it with you. Q217 Chairman: Is it your view that the status of automatic and remote terminals as set out in the joint statement and the proposal for defining the number of casino tables available for use clarify the situation sufficiently? Viscountess Cobham: They do and we feel we can live with it, yes. Q218 Lord Wade of Chorlton: The government's proposals introduce the new concept of a non-gambling area. Do you think this will be a successful mechanism for preventing problem gambling? Viscountess Cobham: We feel that to deal with problem gambling effectively, or potential problem gambling, means the control of the gambling area. That is what goes to the heart of dealing with the issue which we believe so firmly in, and the government and I am sure you believe so firmly in. We think dealing with that in the best possible way really addresses the issue. Q219 Lord Wade of Chorlton: The fact that somebody can wander off into some non-gambling area and pull themselves together does not have an impact. It is dealing with the person's problems on the gambling floor? Viscountess Cobham: I would suggest so. We do have of course lots of non-gambling areas in clubs currently, so this is not a new concept as such. Q220 Viscount Falkland: Do you really think it is appropriate for children to be admitted into non-gambling areas? Mr Allen: In a word, no. Viscountess Cobham: You have five out of five. Mr Love: It is a very loud no. Q221 Chairman: Why do you think the government suggested this? Mr Love: I have no idea. Mr Allen: They have probably been to Las Vegas and had a look over there. Q222 Chairman: Is it that they are thinking about the big leisure mix type of regional casino, where it would be unrealistic for adults only to be admitted? You do not want children anywhere near your casinos? Viscountess Cobham: No. Q223 Chairman: Or any new ones you develop? Mr Kelly: No. Q224 Mr Wright: Can an effective and workable barrier be maintained between gambling and non-gambling areas? Do you really believe that local authorities are the appropriate bodies to have the responsibility for enforcing this or should this really be for the Gambling Commission? Viscountess Cobham: All the existing clubs have shown that they have maintained some quite tricky regulations in the past. For example, when alcohol was not allowed near gaming tables. They achieved that very successfully as far as I am aware, so I do believe that this can be dealt with very effectively. We would in principle agree with what the Minister said when he gave evidence, that probably the Gambling Commission is a more appropriate body to deal with this. Mr Love: We would agree with that. We are judged on our fitness and propriety to hold an appropriate licence and part of that must be the social responsibility that is involved in it. Q225 Chairman: You will have observed that all of our next witnesses have overseas companies looking to invest in the United Kingdom. Are any of your members or any of the companies represented here nonetheless also interested in developing regional or resort casinos? Would we be wrong to conclude that the proposals mean that our existing casino industry is excluded from investing in such casinos because of their size or not? Viscountess Cobham: Chairman, I think a goodly number of those currently running operations in the United Kingdom will also be interested in regional casinos, and so I would not like you to think for a minute that we were not going to be interested in the development of the industry, both the existing industry and what might develop in the future, but we just do not want existing industry to have a detrimental impact. Mr Herd: We certainly are interested in developing regional casinos because we think they will be wonderful things, we think they will be great for consumers, great for local authority areas who want them so much, great for the people who work there, they will generate tax, investment, all kinds of things, and we absolutely want to be a part of that. It does not mean, however, that we do not also believe that there should be a level playing field. Mr Kelly: I will be very brief, Chairman, so as not to build on what everybody has said. Certainly my organisation will be very interested in regional casinos. We also think they will be a great product. However, we are far more concerned about an orderly expansion of the market‑place and the long‑term implications of certain conditions that would damage it in my view. Q226 Chairman: If the policy did not change from where it stands at the moment, if it stayed as it is, would you expect that some of your existing members would seek to convert existing casinos in the provinces in the regions to become regional casinos and should that be permissible? Viscountess Cobham: The reason that we have suggested a higher level of entry for any new casino in the future is because we recognise that the Government have decided that it is the number of outlets so I think we take on board that if there is a concern about the conversion, say, of night clubs that what we proposed would deal with that. Q227 Chairman: I am talking about the conversion of existing casinos. Take, for example, the Stanley Casino in Birmingham; should it be possible for that to be converted into a regional casino, subject obviously to the granting of a regional licence and the support of the regional planning body and it fitting with the regional spatial strategy. In other words, are we wrong to assume that all these new regional casinos will actually be new casinos or might there be an element of existing casinos closing down and being replaced by a new casino? Mr Kelly: Many commercial organisations will be as opportunistic as they can be to enter into an area where they can develop their shareholder interests and, bluntly, if that means converting large casinos into regional casinos, provided all the boxes can be ticked and the right characteristics can be impacted on that, then absolutely. Viscountess Cobham: The answer by the way is yes from Stanley. I have just had endorsement. Chairman: I thought so. I am most grateful for the aside. Thank you all very much. We have managed to keep very much to time. It has been very fascinating. Your message is very clear; we are grateful to you for your attendance. Witnesses: Mr Lloyd Nathan, Managing Director, Europe, MGM Mirage Development, Mr Peter Bacon, Chief Executive, Sun International, Mr Andrew Tottenham, UK Representative of Caesar's Entertainment, Mr Tobin Prior, Chief Executive Officer, UK Gaming, Kerzner International, Mr Steven Eisner, Vice President of Development, Ameristar Casinos, and Mr Rodney Brody, UK Representative, Las Vegas Sands, examined. Q228 Chairman: Can I welcome our final group of witnesses for today. The number of witnesses for each session is growing and we are now up to six. I am sure you will have heard my opening remarks that it is not necessary for you all to answer each and every question but do speak up if you have got something you wish to add. Can I begin by welcoming you. I am sorry, I have not read out your names. We have one or two familiar faces who have been before. Lloyd Nathan, Managing Director for Europe, MGM Mirage Development; Peter Bacon, Chief Executive of Sun International; Andrew Tottenham, UK Representative of Caesar's Entertainment; Tobin Prior, Chief Executive of UK Gaming Kerzner International, and Tobin has been before; Steve Eisner, Vice President of Development at Ameristar Casinos, who is new to us; and Rodney Brody, UK Representative of Las Vegas Sands. You are all extremely welcome and thank you for coming. Can I begin by asking you have the Government's revised proposals now resolved the issues which were left undecided in the draft Bill, in particular grandfather rights and the mechanism for defining and deciding the location of the largest casinos? Mr Tottenham: I think as far as the mechanism for defining and deciding the location of the largest casinos, yes, the Government has provided quite a lot of clarification in that regard but as far as grandfather rights is concerned the answer is no. We believe that there is a risk currently with grandfather rights being granted to casinos that meet the classification of a regional casino currently applying for a casino licence under the existing regime and then automatically receiving a licence under the new regime as a regional casino and not being subject to any regional spatial strategy and also no regeneration requirements. Q229 Chairman: So what would have to be done to avoid that problem in your view? Mr Prior: I think two things. I think that we ‑ I certainly ‑ would concur with the recommendations made by the previous witnesses that in fact the criteria for the minimum demise should be larger in the first instance which I think would prevent more subversive strategies to avoid planning strategies. Secondly, it is my belief that all applications for regional casinos should be new applications under the new dispensation. There are no regional casinos at the moment and nobody should be grandfathered into a regional casino automatically. They should apply at the right time to the right authorities that can give the relevant consideration ‑ the planning considerations and licensing considerations ‑ under the relevant framework that will then be provided. If they meet those criteria then by all means at least they should go through that process. Q230 Chairman: Do you all concur with that? Mr Bacon: Yes. Chairman: You all do. Thank you, that is very helpful. John Pugh? Q231 Dr Pugh: How are the Government's proposals going to affect the UK's competitive position? I really mean by that not whether we will establish a new international market, which we will, but whether this market will have a real edge so that people will say, "I was going to Monte Carlo or Las Vegas or whatever; now I am going to Blackpool or Birmingham." Could you comment on that please? Mr Nathan: That question is difficult to answer in isolation from the eventual taxation regime and in addition the form and final impact of the third EU Money Laundering Directive. If I put those two aside and look at the proposals as they stand today, I think it will improve the UK's competitive position greatly, in particular with regard to Europe. Q232 Dr Pugh: So do you think it will draw people from Europe to this country? Mr Nathan: Yes, we believe that it will draw people from Europe. Mr Tottenham: I think that the tourism industry in this country was once described to me as we have great heritage and people come here for the heritage but they put up with the hotels. What we are looking at is an investment in a service sector that desperately needs competition from foreign investors where service is paramount. So I think this will be a catalyst for change for this industry. Q233 Dr Pugh: So it will be a ripple effect throughout the whole British hotel industry? Mr Tottenham: Yes. Q234 Lord Donoughue of Ashton: You gentlemen ‑ and I notice how few ladies there are amongst you ‑ have a lot of experience of casinos in foreign jurisdictions. Do you think the proposed size definition for regional casinos will succeed in limiting their proliferation? Mr Bacon: If I could answer that by saying I think based on international experience and precedent the proposed size is perhaps problematical and I would certainly be of the view, and I think my view is shared by some of the other gentlemen sitting at the table this afternoon, that there would be merit in giving consideration to an increase in the size. This could be done by redefining the overall size of a casino including front-of-house and back-of-house to around 10,000 square metres or adjusting the ratio of gaming to non‑gaming areas, but 5,000 square metres is not a particularly large area for a regional casino of the type envisaged. Q235 Chairman: Would it be fair to say that 5,000 square metres is about roughly what the number of cruiser weight proposals would be thought likely to have to invest in? Mr Bacon: I think that is true. When you add to the minimum 1,000 square metres the front of house, circulation space, restaurants, bars, and some other facilities, you are going to be getting pretty close to the 5,000 square metres potentially, so I think there is merit in giving consideration to an increase in the minimum size for regional casinos. Q236 Chairman: Does that mean having to increase the minimum table gaming area or is it the additional gambling area and the non‑gambling area where the increase needs to come? Mr Prior: I would suggest that it comes in the non‑gambling area or is not specified but the under one roof demise as it were is at least of a certain size. I would also like to make the point, if I could add, that it is not just going to be the size criteria that limits the proliferation of these large casinos or regional casinos, as we have heard. It is going to be the regional spatial strategy plans, the size of the investment that goes with the level of facility that accompanies the planning gain and so on. The level of investment that is being looked at is usually over the order of £50 million to £200 million and is also going to be a significant factor in limiting the number of these that actually get to market in my view. Mr Nathan: In the written submission we specifically suggested that the non‑gambling area be increased from 1,500 square metres to 3,000 square metres, so broadly I would concur with all the views expressed here. Q237 Lord Faulkner of Worcester: Could I ask you about your general view on the revised Government proposals, their response to our report. Would it be fair to say that you are broadly supportive of it but you feel that you are bound to be cutting back your investment in the United Kingdom a bit because of it? Would that be a fair summary of your position? Mr Eisner: Our position is that these proposals have really solidified our view in terms of the investment in the UK. I think our business model of providing a top‑quality full‑scale leisure destination can be successful with these proposals but I would also caution that that appetite really would be significantly impacted by any reduction in the number of gaming machines, the ratio or the maximum limit, as well as a change in the competitive environment, whether it be an increase in the number or ratio of machines to table games in large casinos, and how large casinos are allowed to proliferate. I think it is important to look at the entire mix and not just look at regional casinos in isolation. As Tobin mentioned, we are talking about investments of £150 million and up. That is really what we are talking about. We would certainly be in favour of increasing the minimum size requirements for regional casinos but our ability to invest in those types of large‑scale facilities that do draw from Europe and everywhere will very much depend on the competitive environment. Q238 Lord Faulkner of Worcester: I understand that but on the basis of what the Government have said, which is the latest statement of their position, how are you viewing the United Kingdom market? Mr Eisner: Very favourably. Q239 Lord Faulkner of Worcester: So you would like it to be better but you believe that you have got a great opportunity with what is on offer now? Mr Eisner: Yes we do. Mr Brody: I would say the level of regeneration will obviously be affected by the limitation of the slot machines as mentioned in the Budd Report. We are still committed but there may be a reduction in the amount of regeneration that it is possible to achieve. Chairman: We might touch on regeneration a little later. Lord Walpole? Q240 Lord Walpole: Do you think that the new small and large casinos will be viable businesses under the Government's proposals, or, in other words, would you like to invest in a small casino? Mr Prior: If I could answer, I think that given the proposals outlined thus far there will be regional spatial strategies which will determine where regional casinos will be and they will by their very nature be limited, and we can debate in the light of previous witnesses' evidence exactly how far they are limited. I think there will be significant opportunities for new large casinos. There are a lot of areas where gambling is currently not permitted where I think there would be opportunities for new large casinos. Despite what you heard from the last witnesses, I would be very surprised if in some areas like Croydon, Watford, Milton Keynes, St Albans, Woking, Tunbridge Wells, to list but six - and there are many, many more - there would not be new opportunities for large casinos in the current format let alone a debate about a level playing field for what is in those casinos. There will be markets which clearly regional casinos will not be tapping into because of the regional spatial strategy where there may well be good opportunities for new investments in large casinos. Q241 Lord Walpole: You might be prepared to invest in them? Mr Prior: Absolutely. Mr Nathan: We would concur in that and concur with the previous panel as well because the previous panel referred to their belief that they would not be viable where they are in direct competition. There are plenty of areas and towns that are big enough to merit a small and large casino. It is a low-capital expenditure to build them and I think they would be highly successful businesses. I imagine that everyone round this table if they were pushed in that direction would look at them quite seriously. Q242 Chairman: And these would be in places, and you named some Mr Prior, which at the present time are not permitted areas? Mr Prior: Correct and which probably would not withstand significantly large investments of the nature we have been discussing in terms of regional casinos. I think it is also pertinent to point out that there is likely to be a period after this law becomes enacted and other regional casinos come to market where existing casinos with existing player bases are able to go to the market and take advantage of what the new regulations allow and develop a very strong business, which obviously a substantial investment which takes two years to build is not going to be able to do. I do not see quite as much doom and gloom as was portrayed by the previous witnesses. Q243 Janet Anderson: Do you think the Government's proposals overall will succeed in limiting proliferation and therefore problem gambling? Do you think the Government has just about got the balance right? Mr Bacon: I think the notion of having a few large regional casinos will, in my view, help with the limitation of any proliferation of problem gambling. I think the difficulty that the Government will face is how to avoid a proliferation of large casinos. I think that by virtue of the market the number of regional casinos will be limited. It will be limited to large cities and towns with sufficient population to support very substantial investments in large regional entertainment centres, the core component of which will be a large international style casino. I would be more concerned if I were in the Government's position about a potential proliferation of large casinos which could happen unless there is some cap or some method through the planning process of ensuring that there are not a large number of these in any given location or area. We will move on to how many regional casinos a little later, but by virtue of the fact that there will be fewer large casinos that will assist in limiting proliferation of problem gambling. I would be more concerned about the proliferation of large casinos. Chairman: The very question you have just posed. Q244 Lord Mancroft: "Later" has now come. I am sure you talked about this but how many regional casinos do you think there will be under the present proposal? Mr Bacon: I will answer that and I think there are some different views around the table. Our view, based on a fairly careful study of the market in this country, is that the market could support 25 to 30 (maximum) regional casinos and here we are talking about very substantial investments upwards of £50 million. Q245 Lord Mancroft: Do you think they would all occur on day one as it were? Mr Bacon: No, I doubt it very much. I think there would be quite a lengthy process in competing for these opportunities. If the opportunities are site specific there will be competition for those sites and quite a lengthy planning process. Mr Tottenham: I think it is very hard to answer this question because we need to understand what the regional spatial strategies will be like. Having spoken to some of the regional authorities ‑‑‑ Chairman: Order, there is a division unfortunately in the House of Lords so we will suspend the Committee for ten minutes. I do apologise. The Committee suspended from 4.10 pm to 4.15 pm for a division in the House. Q246 Chairman: Mr Tottenham, I believe that you were about to tell us your estimate on the number of regional casinos. I think these answers are a combination of how many you think there will be and how many you would like there to be. Mr Tottenham: There is a lot of truth in that. As I was saying, it is very hard to say today because we do not know what the regional spatial strategies will look like. Having spoken to the some of the planning authorities, they are quite far back in the process in determining this. The other element is grandfather rights. We do not know what is going to happen with applications for casino licences in the next year before this Bill becomes law, so we do not know what is going to happen there. Subject to that and subject to taxation being acceptable, it is our estimate that there will be somewhere in the region of 25 to 35 regional casinos. Mr Prior: I wish to state that I have been on record before this Committee before with my estimate and it remains consistent. Obviously it is qualified by what the dynamics of the market‑place will end up being. I would like to stress one point that it is still not clear from the policies what potential proliferation of large casinos we might be faced with which will have a significant impact on the number of regional casinos ultimately out there in the market‑place, but my view is that there will be between 15 and 25 regional casinos and that is over the medium term. I do not think they will all be lined up on day one. Q247 Chairman: Medium term meaning ten years? Mr Prior: Five to seven years. Chairman: Let's turn to gaming machines. Q248 Viscount Falkland: What are your views on the gaming machine to table ratio of 25:1 for regional casinos and the 1,250 machine cap for regional casinos? Mr Nathan: I think the proposed cap of 1,250 for category A machines will limit the size and scale of any given project. Given the risk and magnitude of capital expenditure required to actually build a regional casino there should be no reduction in the number of category A machines, the proposed ratio of 25 machines to one table game, nor any limitation on the range of machines that one can have available to any operator within that 1,250. Any reduction to which I have referred will make the deliverability of regional casinos potentially unviable. Mr Eisner: Just to follow on I think that it does strike, as the Government attempted, a fair balance between companies' ability to develop full entertainment‑type facilities and to provide for a controlled growth of the market as opposed to just an open, unmanaged growth, so I think that is an important point. The goal was a controlled and managed growth. I think that is what a 1,250 machine cap and a modest number of regional casinos will allow for. Mr Tottenham: Caesar's is in favour of a cap, there is no question. Also I think that the 25:1 ratio is sensible but the 1,250 machine cap that has been proposed has been proposed without taking into account the actual investment required to put into one of these resorts and the returns that you are looking for. It is the additional facilities that create the demand for the gambling product not the gambling product that creates the demand for the additional facilities. The other thing is this is about managing peak business, it is not about managing day‑to‑day. 1,250 machines means you can have 1,250 people playing on machines at any one point. That means on a Friday and Saturday night you will be full and you will be having people standing waiting to play and some of them will leave dissatisfied. On a Thursday morning or a Wednesday morning you will probably have, if you are lucky, 100‑150 people, so the very fact that you limit the number of machines in this manner at 1,250 means you jeopardise what you could have achieved in terms of investment and regeneration, you limit the amount of planning gain that could have been available, and you limit the investment, and we are arguing that this should be moved up and then it becomes an extremely attractive proposition to build a very large resort. Q249 Janet Anderson: What estimate have you made of the average annual profit per machine? Mr Prior: I have been working on the average daily take per machine and that is a competitive piece of information that I would not really like to give you but let me say this, it is probably around $130 on average and it will vary from region to region. Janet Anderson: £130 take per day? Q250 Chairman: $130 per day? Mr Prior: Yes it was dollars, $130 per machine per day. Q251 Janet Anderson: That is not profit? That is what goes into the machine? Mr Prior: That is gross gaming revenue per machine per day. It would be of that order. Q252 Chairman: If the machine paid out 85 per cent of stake in prizes your take will be 15 per cent of $130 and out of that you have got to pay tax and all your overheads? Mr Prior: Yes, and just to make the point, that varies by machine, varies by denomination, varies by market, et cetera, et cetera, but that is the average practical number that we would be working on. Mr Eisner: As Tobin said, for competitive reasons we have probably all got different numbers that are up or down from that but it will really depend on competitive conditions in and around you. If there are 1,000 machines serving London I am pretty confident that number would be a lot higher, so it is just a matter of how many large casinos there are, how many regional casinos there are, and what the mix‑up will be and what the particular jurisdictions are. Mr Prior: In other jurisdictions overseas that number will vary typically somewhere between £100 and £160 and there are exceptions, and you mentioned some at this Committee before, in France and one or two specific jurisdictions, but that is a pragmatic average number. Q253 Lord Brooke of Sutton Mandeville: I heard Mr Tottenham's original equation and I followed his logic from his premises and I have no disagreement with the logic he followed. I did not actually catch in either his equation or his premises any reference to problem gamblers. Would that number also go up as the cap on traditional machines was raised? Mr Tottenham: I do not believe so. I think that problem gambling is an issue that we deal with wherever we are in the world and we like to think that we are responsible in the efforts that we put in in managing that problem, and that is everything from training our employees, access to information, making people aware that this might be a problem. I do not believe that increasing the number of category A machines in a destination casino is going to increase the absolute number of problem gamblers. Q254 Chairman: So you think it is proliferation of outlets rather than proliferation of the total number? Mr Prior: That is a bigger issue. Mr Bacon: There is little point in proposing a cap on the number of machines unless one addresses the regulation of the supply, the number of outlets. I mentioned before the potential for the proliferation of large casinos. Also I think the issue of problem gambling has got a lot more to do with the location of casinos as opposed to the number of machines ‑ where they are actually placed. Q255 Lord Mancroft: Taking your equation, Mr Tottenham, and what you have just said also about responsible gambling, assume therefore that the existing small casinos ‑ and it does not apply to all of them as we know ‑ be allowed two or three category A machines per table, that would affect neither the profitability of the machines in the regional casinos nor would it, if we take your equation further, have any affect on problem gambling, would it? Mr Tottenham: There is an issue here. I agree with the premise, yes, that is if the number of those outlets is controlled, one, and, two, that the small casino could not be 25 or 30 tables. Q256 Lord Mancroft: The existing industry? Mr Tottenham: The existing industry I do not have a problem with. Q257 Lord Mancroft: You as a group, as it were, do not have a problem with the existing industry having what this Committee propose and which the Government appear not to be very keen on which is category A machines? Mr Tottenham: In the existing I do not think so, I think they are a controlled environment. Mr Prior: I would like to make a very clear point. What is not in any of the proposals is how proliferation of those will be controlled because we are getting back to the number of category A machines, which is the number of outlets times the number of machines in them, and we are capping and controlling regional casinos but somehow large casinos do not get capped and controlled. You cannot let the one free and control the other. If you are looking for a level playing field it is a matter of how you define that playing field. The number of category A machines in the market will definitely define the viability of regional casinos and if there are a lot of them in a nearby market, then you have exactly the same gaming offering in that market you have got to make a huge investment with a lot of planning gain, and that certainly is not a level playing field. Q258 Mr Page: You gentlemen have had the benefit of listening to the previous witnesses on the question I am going to ask about category A machines. I noted carefully that Lloyd Nathan said that there should be no limitation on the range of machines. What proportion of the regional casinos' gaming machine entitlement would you expect to consist of category A. I am looking for a six‑nil answer here. Mr Nathan: I think you might get it. I can tell you from real life experience, Chairman, across our properties on average well in excess of 90 per cent of our machines are category A. For example in Detroit, Michigan 93.2 per cent of our machines are category A and ‑‑‑ Q259 Chairman: What does that mean in stakes and prizes? Mr Nathan: Unlimited stakes and unlimited prizes but it does not mean all of them have a mammoth jackpot. I am trying to equate ‑ because we do not have category A machines, that is not how we define them ‑ what you would see as a category A machine and well in excess of 90 per cent of machines fall into that category and that is by choice. If we wanted to have 100 per cent we could have, we are not limited to 1,250, so it is at our discretion as to what percentage of machines are category A. Q260 Mr Page: I am slightly lost here. I thought category A was a sky‑is‑the‑limit jackpot, but you are indicating that is not quite the case. Mr Nathan: Yes. Q261 Chairman: Mr Tottenham, help us here. Mr Tottenham: I will try. Not all machines in a casino will have an unlimited jackpot. Some might have a jackpot of £5,000, some £10,000, some £20,000, some £50,000. Some machines will be linked with a mystery jackpot and that will mean you are playing and suddenly you will win a jackpot out of nowhere and that might be an unlimited jackpot. What I can say is that in this country we have chosen to categorise machines as category A and category B. For Category B the maximum prize currently is £500. I can say quite categorically that with 1,250 machines none will be category B. Q262 Chairman: What if the limit was £10,000? Mr Tottenham: Yes, there would be some. Q263 Chairman: Or even £5,000? Mr Tottenham: Yes, there would be. Q264 Chairman: There would be? Mr Tottenham: Yes. Q265 Chairman: Right, so if in answer to the Minister's acceptance that category B machines could have different stakes and prize limits according to type of premises, if there was, for example, a category B limit for casinos of, say, a £10 maximum stake which might be five lines of £2 and £10,000 as a maximum prize, a number of your machines would be in that category? Mr Tottenham: They would fall in that category but what that does is then all of a sudden large casinos proliferate because there is no control over the location of those and they are allowed 150 category B machines maximum and at that level there would be quite a few. Mr Prior: I would also concur that we envisage that the ratio of machines would be totally at the discretion of the operator and our operations typically would be 100 per cent category A. I believe that there is a misplaced fear that all category A machines are going to have some amazingly high jackpot that is going to lead to compulsive behaviour which is not borne out in reality. It is not a sustainable business strategy for operators in opposition. Higher jackpots have a lower probability and a lower frequency of pay‑out and machine gaming customers are quick to grasp that. A mix of lower frequency lower pay‑out machines typically predominate on the gaming floors. It is important that operators can react to the evolving machine market by placing the appropriate machine mixes on the floors. A lot of the machines would be in the £10,000 to £20,000 pay‑out category. Q266 Chairman: I can understand you not wanting to volunteer for restrictions that you might find difficult but if public concern and potentially parliamentary concern is focused on the number of ‑ whether it is a sensible way to do it is another matter ‑ category A machines which are seen as unlimited stakes and unlimited prizes, there may be in people's minds a greater problem than actually will exist in reality in the casinos which you develop. That is really what we are driving at. Mr Prior: To counter your argument the number I have given for average machine yield category A is what machines are currently yielding and if you restrict that then ipso facto you are going to restrict that yield and it is going to have a big impact on the ability of this to happen. There is a balance I would caution. Mr Bacon: The other point I would like to make, Mr Chairman, is that you referred previously to a win percentage of 15 per cent but typically in an urban environment as opposed to a resort environment the win percentage is more likely to be in the region of five to six per cent. Q267 Chairman: By win you mean house win? Mr Bacon: The amount retained by the casino after handling through the machines. If it is anything above that, to be very honest with you, we would be unsuccessful in building a sustainable market. We have got to be able to provide a good value‑for‑money gaming experience. I think that is the way to look at it. Mr Page: I think this has been exceedingly useful but what you are boiling down to, as far as I can see, is to say, right, you all want category A machines 100 per cent but that you will not be using them to their full limitation. You will grade the market according to the customers that will be coming in so some will be very much lower even though they have the capacity to pay out infinite amounts of money, which is interesting. Q268 Chairman: We will endeavour to clarify this in what we say I am sure. Can I just be certain about this that when you say that the minimum size that is proposed for a resort regional casino should be increased that that increase is still relevant even if the cap of 1,250 machines remains in place? Mr Tottenham: Yes. Mr Nathan: Yes. Q269 Chairman: That is another six‑nil answer? Mr Nathan: Yes. Chairman: Fine. Let's turn to non‑gambling areas. Lord Wade? Q270 Lord Wade of Chorlton: When you were talking earlier you referred to the fact that you would like to see the destination regional centres have a greater area of non‑gambling facilities. The Government have proposed what to some people is a large area of non‑gambling facilities and we are wondering from your experience does this have a benefit on problem gambling because the Government believe the non‑gambling area is important in their non‑problem gambling policies? Mr Tottenham: Given that people in the field of treating and studying problem gambling believe that being able to go away and to cool off and reflect on one's losses is very important, I think that if you have an ability to leave the gambling area and go to a non‑gambling and where gambling is not promoted without leaving the facility obviously that creates less of a barrier to leave and it creates less of a barrier to reflect to go and reflect and cool down and therefore it would be successful in that sense. Q271 Lord Wade of Chorlton: Anybody else? Mr Eisner: In addition, the concept of a non‑gambling area really adds to the flavour of the facility as a destination leisure offering and not just a casino like a larger version of existing casinos today. It puts it into a different type of facility. Q272 Chairman: Would we be wrong if we concluded that the non‑gambling areas are themselves profitable. Presumably you still make money out of your restaurants and bars? Mr Eisner: Absolutely. Chairman: I thought you might. Q273 Viscount Falkland: If I may, I shall ask you a question which I asked our previous witnesses and it would be interesting to see your response. Do you really think it is appropriate for children to be admitted to non‑gambling areas? Mr Nathan: Yes I do, as long as they are kept out of the gaming area. It is appropriate because it recognises what the Chairman said previously that we are looking at the reality of a regional complex and it is offering a whole mixed leisure and entertainment attraction to different people. I would concur with not allowing children into what we see as existing casinos because they mostly comprise of gambling and that is not appropriate. Mr Tottenham: Exactly. I think it is a lack of understanding of the product. A regional casino is extremely large. It will have restaurants, it might have extreme sports, it might have ice rinks. It could have any number of elements to it. In order to make it work you need to attract people to that facility. We are saying that gambling is a legitimate form of adult entertainment; absolutely. Children should not be allowed on the gaming floor; agreed. To say if you are a resort casino no children are allowed in the facility, some of our resorts have hotels and those would be non‑gambling areas. Q274 Chairman: In Sydney, Baroness Golding and I saw the theatre that has been built within the Star Casino. If there was a kids' pantomime put on there you would expect the children to go. Is that part of the non‑gambling area or is it just a theatre next door to a casino? Mr Prior: The non‑gambling area has not been defined exactly. There is a bit of description in the Government response to what they see those things being for. When one looks at the broader concept of a resort destination or a regional casino, if you are not asking children to go anywhere near the casino - and if you try in any way to induce them to gamble or expose them to gambling clearly there are other statutes that make that an offence - then the other facilities that we are being asked to build should cater for a broader community potentially and not preclude those people. It is a matter of how you developed it. I do not think anybody is proposing that in order to get to the pantomime you have to cross the casino floor. It is a matter of guidance and I think this should be handled by the Commission as to how these facilities are put in place. Q275 Viscount Falkland: Forgive my ignorance of this but I have not been into a large casino and seen this operating. What is the nature of an effective barrier between the gaming floor and the non‑gaming areas? Would it be in practical terms restaurants and catering facilities between the gaming floor and the areas where children might be admitted? How would it work? Mr Prior: Can I take a step back and add something to my previous answer and then answer that directly. As an example, if we were to build a large, conventional exhibition space as part of the under one roof big scheme and there was an exhibition of motor cars on it and you wanted to take an 11‑year‑old child to that exhibition, I do not see the sense in restricting children from seeing that if it is something of benefit to the community. That does not pre‑suppose that anybody would be trying to get that child to gamble or get them near a gaming floor and I think that can be protected against adequately within the realms of this Bill. With regard to specific barriers it is very easy to make height differentials and physical barriers and entry access points on to a casino floor and to marshal those and have surveillance and have people patrolling those so you can ensure children do not get on to that floor. That answers your second question. Q276 Viscount Falkland: There could be within the design of the casino for children attractions which would distract them in any case from thinking about gambling. Mr Prior: I do not think they should go near the gaming floor, absolutely. Lord Faulkner of Worcester: Can I take it that you would not be interested in putting in any sort of category D machine that children would be able to play in a separate part of the premises? Q277 Chairman: Order, I regret to say there is another division in the Lords. However, we are still quadrate and Lord Faulkner says that he would just like the question answered quickly and then he can go and vote and that will enable us to continue. Mr Prior? Mr Prior: It is not our intention to offer specific gaming machines for children. Q278 Lord Faulkner of Worcester: That is a six‑nil job as well? May I ask one more. This is to Mr Brody and to Mr Nathan. Both of your companies are particularly interested in developing casinos based at sports clubs and particularly football grounds in Britain. Mr Nathan: That is not correct in our case, Chairman. We have an existing deal with Newcastle United Football Club but that was predicated upon the site and the tremendous added value that the club brings. Our strategy in this country is not based upon football clubs as such. Q279 Lord Faulkner of Worcester: Mr Brody's is. Mr Brody: Yes, I would like to emphasise the point that two thirds of the area will be non‑gaming so there will be one‑third gaming and two‑thirds non‑gaming. There will be a tremendous amount of attraction for the whole family. With the connection we are looking at so far with football clubs, we are looking at it as a family entertainment area completely changing the way that entertainment is offered in this country. There will be a tremendous amount of choices for families and children for example bringing in the museum, the history and the artefacts and the trophies of the club and all that kind of thing to make a club atmosphere there so children can come with their families and enjoy it. Apart from that there are going to be a great deal of restaurants and sports bars where you can watch all the top sporting events throughout the world. There will be so many different varieties of entertainment for the family. Q280 Lord Faulkner of Worcester: Under the new definition which is contained in the Government's response you intend that these would be regional casinos of a regional casino size? Mr Brody: These are regional casinos. Q281 Dr Pugh: Can I ask a further question on children before we move off altogether. None of you would dispute that in having children's areas within casinos if you do have a gambling problem (however you might define gambling problem) and you do have children as well, life is made easier for you by allowing children into the casino? If I am a parent and I also have a gambling problem, I gamble more than I should, and you tell me that children are to be debarred from the casino, life is made a little more awkward for me. If, on the other hand, children are allowed into the casino, life is made easier for me. Is that not the case? Mr Prior: I think there may be circumstances where what you are describing is true. I think that has to be balanced with the reality where if you are building a major destination leisure centre, which we are being encouraged to do, that there will be a broader family that might want to visit that, and you have to balance if people do arrive with their children what are you going to do then; leave them at the front door, leave them in the car park? Mr Bacon: On that particular point I think it would be somewhat inappropriate to inconvenience 97 per cent of your customers in addressing a concern which is specific to three per cent who may have an impulsive or compulsive gambling problem. My own view on this is that children should be allowed access to casinos if there is a clear demarcation between gaming and non‑gaming areas and children should no be expected to cross gaming areas to gain access to non gaming areas, the access should be completely separated. In my experience the supervision of children on premises is very important. Finally, with regard to the three per cent or thereabouts of customers who may have a compulsive gambling problem, through the correct programmes those people can be identified and they can be assisted. I do not think restricting children is going to have any significant impact whatsoever. They are going to be left at home, they are going to be left in cars and car parks. Rather, we should manage this problem in a different way. Q282 Dr Pugh: You talk about inconveniencing the 97 per cent or 95 per cent or however many it is. Is it a current complaint amongst current casino users, "We cannot bring the kids"? Mr Bacon: I would agree with that. It would be inappropriate because there are no facilities for families in current casinos. We are talking here about very large regional entertainment centres with a wide variety of attractions. Q283 Dr Pugh: I appreciate that. Mr Bacon: That is a completely different proposition. Mr Brody: I think it is important for everyone to realise that we are talking and looking at entertainment complexes of which a casino is a part rather than a casino. That is very important, I think, for everyone to realise. Q284 Mr Wright: To keep on the question of non‑gambling areas, this is the same question I asked the previous witnesses. Do you consider that local authorities are the appropriate bodies to bear responsibility for enforcing the separation of the gambling and non‑gambling areas or do you see this as an area for the Gambling Commission? Mr Nathan: I think that both should be involved. I think that local authorities would work with the casinos to ensure that the applicable planning requirements are being complied with and I think the Gambling Commission should ensure that the appropriate licensing conditions are being complied with, one of which would be protection of the young and vulnerable or current social responsibilities as a licence condition and that would ensure that gambling and non‑gambling are kept separate. Q285 Mr Wright: Mr Tottenham? Mr Tottenham: Absolutely. Chairman: Let's turn to planning. Lord Brooke? Q286 Lord Brooke of Sutton Mandeville: My question is to Mr Tottenham. I did ask a question on the last occasion on which we met. I have no emotional capital tied up in the question but in his answer he said that he was completely in the dark as to how the planning system would work in relation to casinos. Has the joint statement from ODPM and DCMS provided him with sufficient clarity on this issue or does he have outstanding concerns? Mr Tottenham: I am certainly pleased that the Government has clarified the issue and I think we do understand the process as to how this is to work. Obviously we are a little uncertain on the implementation but time will tell. Outstanding concerns? Yes, and that is that the current casino user class is D2 and, as I understand it, that is regionally significant leisure. In other words, the regional planning body would only be interested and have a broad location for it if it is regionally significant leisure if it is 500,000 square metres, whereas regionally significant casinos supposedly would be under the current ‑ if you take our proposal ‑ 10,000 square metres. Q287 Chairman: That is double what the Government wants. Mr Tottenham: We say 10,000 square metres. What we see as a possibility is that, for example, the country is crying out for tennis centres so somebody builds an indoor tennis centre which is 200,000 square feet, a large box. If they get the planning consent for it, they start to build it and they sell it on as a casino, it is not regionally significant leisure and it comes in under the radar screen and is not subject to the regional spatial strategy, and it could therefore be converted into to casino with no extra building so does not need to go through the planning process again. What we would like to see there is that there is either a separate user path for the casino or they are sui generis. Lord Brooke of Sutton Mandeville: I understand the answer. Q288 Chairman: Is that a six‑nil as well? You all think this should be done? Is it all your view therefore that this would help to limit the number of regional casinos? Mr Tottenham: Yes. Q289 Chairman: And avoid the proliferation? Mr Tottenham: If I might add I think it is also about putting them into the places that the regional authorities, in consultation with the local authorities as part of these strategies, want them to be as opposed to them cropping up out of control. Q290 Chairman: Yes, that is clear and they will all need a regional casino licence. Mr Tottenham: Correct. Q291 Jeff Ennis: Do you think regional planning bodies are the most appropriate bodies to determine the location of regional casinos? Mr Nathan: I think Mr Tottenham just answered it by saying that in consultation with local authorities, yes, but as far as location is concerned that is taken to be the broad area, which is what I believe ODPM and DCMS have said, then yes I believe it is the most appropriate body in consultation with the local authorities. Q292 Jeff Ennis: Can I ask a supplementary. From evidence we have already heard it appears to me that there are three general categories of potential sites for regional casinos. You have got the resort casino location, the potential city centre location, and the sports complex location. They appear to be the three broad main categories. From your industry's perspective do those three different broad categories have the same parity of esteem or would you see city centre locations having more support and there being more demand from the industry to provide that sort of location over and above, say, a resort location or a sports complex location? Mr Eisner: I think it is a hard question to answer in the abstract because every site really does have its unique characteristics. It would depend on market demand, roadway infrastructure, access and other competitive conditions. In order to say generally speaking we prefer city centre sites or generally speaking we prefer resort destinations I could not speak to that without looking at specific locations in specific regions. Q293 Jeff Ennis: Is that the same for all witnesses? Mr Nathan: I would agree with Mr Eisner, if we look at sites where we have entered into agreements now they are a variety ‑ some city centre, some not, some in shopping centres, some by football clubs - and it has not been predetermined by the three categories that you outlined, far from it. There are many different criteria, some of which Mr Eisner alluded to, that would determine where the best site is. Mr Bacon: I think the overriding consideration is proximity to the relevant market and ease of access, public transportation, issues such as that. I would not personally categorise the different types of regional casinos in the way in which you have. Mr Prior: I sense that the location of regional casinos will be determined more by regeneration priorities than any of the categories you have spoken about. These could be any mix and we need to look at those as our primary lead. Just getting back to the previous question, I think regional planning bodies are going to be the right body to determine where regional casinos go. That really begs the question of who is the right body to determine where the large casinos go and if one is going to avoid this proliferation issue that issue has to be addressed at some stage. Q294 Chairman: On the regional planning body role, I think this came across this morning and I do not know whether any of you heard it, but the impression I had was that the regional planning body role is to devise the spatial strategy which may say we think that Blackpool is a good venue, a good location in which to develop regional casinos or resort casinos (that is generally what it would be) but the regional planning body would not be involved in the absolute detail of exactly which blocks of town and city centre got developed and that would still be for the local council. Mr Prior: I understand that. My concern is whoever is determining the location of those things also needs to take into account the location and number or proliferation of large casinos. Q295 Chairman: Which may also arise? Mr Prior: Things tend to be spoken about as if they do not interact with each other but they do. The dynamics are very important. Q296 Chairman: So other large casinos could put a dampener on some regional casinos' investment? Mr Prior: Absolutely. Q297 Chairman: That is what you are trying to say to us? Mr Prior: Yes. Chairman: Okay. Q298 Lord Faulkner of Worcester: I think Mr Prior has probably half answered the question I was going to ask which is whether you are relaxed about the fact that the location of the regional casinos may not be your companies' choice at all? Mr Prior: The answer is yes. Q299 Lord Faulkner of Worcester: Sorry, yes, you are not relaxed or yes, you are relaxed? Mr Prior: Yes, we are relaxed that it might not be our choice. In other words, we understand and accept the recommendation of the Regional Planning Bodies' role. We accept that they will be regeneration focused and I think that is another reason why, if we are putting big investments in regeneration areas, there needs to be a distinction between the product we are offering and what is being offered closer to the market. Everybody has under-estimated this location, location, location which is very key in a market like this. If you have got the parity product in the market with the same machines, etc, as we are going to be offering with a much lower level of energy cost, big schemes are going to be less sustainable and probably less likely to happen. Whatever this level playing field ends up being, those two dynamics have to be considered together Q300 Chairman: Mr Nathan? Mr Nathan: Chairman, if I can just clarify our level of comfort, it is a level of comfort with the broad areas being identified at the regional level but not the exact sites nor the exact number. Q301 Chairman: Mr Tottenham? Mr Tottenham: I would just like to agree with regional planning boards' broad location but not the absolute location, that will be determined, obviously, by local authorities through the planning but it will be our choice, also, providing that the same is true of our competitors, and I mean all of our competitors. That goes to grandfather rights' issues as well as D2 conversions. Q302 Chairman: Are you relaxed about having to contribute to regeneration benefits for an area? There is some confusion about the extent to which the Government thinks these should be a requirement of the legislation. Are you all comfortable with the thought that you may have to contribute to regeneration? Mr Nathan: By definition the scope and scale of what we build would lead to physical, social and economic regeneration, and it would then be up to each local authority to define that. We are talking about new jobs, aid in getting those new jobs, training. The fact that then those jobs create wealth and opportunities for an area, as well as increasing its competitiveness, are obviously crucial components for any regeneration strategy. If I might read into the record, to give you an idea of scale, all the projects that we have entered into to date, if they were successfully completed would represent an investment of in excess of one billion pounds and the creation of over 30,000 jobs indirect and direct construction and operational. Q303 Chairman: Mr Tottenham? Mr Tottenham: I think that one of the things where Caesar's operates, it is not a requirement that they give money for regeneration, however voluntarily they do contribute. They contribute considerable sums of money to a fund annually which is used in the communities in which they sit. Caesar's would be very happy to contribute to regeneration benefits in an area over and above the investment it makes in the plant, et cetera. Q304 Chairman: Mr Bacon? Mr Bacon: Our experience, Chairman, is that there would be a requirement to make a contribution to regeneration. I think if there are going to be fewer large casinos we should expect to make a contribution. I think the difficulty could arise if there is not absolute clarity with regard to the process and the size of the cheque versus the suitability of the project. That is a judgment call on the part of the local authority actually granting the casino premises' licence. I think there would be a need for some very clear guidelines to be issued by the Gambling Commission or the Government. Mr Eisner: I want to amplify in our experience in casino entertainment projects that are of similar size and scope to the 1,250 model of a regional casino here we have seen substantial regeneration benefits to our communities in the form of capital investment, job creation and the like, even where it is not mandated by law. Our experience is a little bit different possibly than some of our larger competitors but it is the same concept. Q305 Chairman: Our local authority witnesses this morning conceded that in fact planning gain and the requirement to contribute to regeneration or the fact the regeneration flowed from the investment was not one and the same thing. Do you have a concern that as well as the fact that you are going to contribute to regeneration you will also have to make a substantial contribution to other planning gain, some of which may not necessarily be entirely linked to your development? Mr Tottenham: I think we have all been involved in certain sites where local authorities have suggested areas that we may wish to invest over and above the facilities, some of which are linked and some of which are not linked. I do not see it as a problem. Again it is dependent upon the location of the facility, the size of the investment and what is being asked in addition. Q306 Chairman: Mr Prior? Mr Prior: I think to some extent I have answered that in my previous question. We are looking at regeneration led initiatives and all of those do involve substantial planning gain. I think we have addressed, in quite some detail amongst us, that planning gain, as long as they are realistic aspirations because the business with its cap on machines can only generate a certain amount of it and can only invest in a certain amount of facilities so it either goes into planning gain or into the facilities direct or whatever. Obviously there is a concern as to what the practical limits of that are. Q307 Chairman: Mr Brody? Mr Brody: I confer with that as well. I would like to add, also, to emphasise our community ties with our partners who we would then be involved with and how we will be helping with the planning gain, helping with the regeneration and also working very closely with our community partner which in many cases will be a football club. Q308 Lord Wade of Chorlton: Just following on from what you have said in reply to that question. If the region wants to regenerate some particular area that might not have a lot of other facilities there, do you find the facilities that you build will attract people in itself or have you got to have other resources around it, either attractive countryside or very good shopping facilities or other sources that will attract them? I am looking at it from the point of view that certain regions may want to regenerate areas where there are very few facilities at all or they may want to use it in town centres where there are a lot of other facilities. I wondered how you would be influenced by those other facilities? Mr Nathan: I do not think it is necessarily a question of what facilities are there rather than what population is there so maybe there are no facilities and there is no population. On the assumption that there is population there but no facilities we are very comfortable in building gaming and non gaming amenities. Well in excess of 50 per cent of our four billion dollars of annual revenues is from non gaming. Mr Prior: I would concur. I think it is driven by the market that you think you can create for that facility and it will vary from location to location. Mr Bacon: If I could just add to that, I think the critical mass of the facilities envisaged, the regional casinos, will be such that they will be able to attract people from the area and would not need to be next to other large facilities or in the centre of cities. Q309 Lord Wade of Chorlton: From your experience people will travel a long distance to come to your facilities? Mr Bacon: Yes,because it will be a worthwhile experience. Q310 Lord Wade of Chorlton: If it was in the middle of the desert people would still travel to it? Mr Nathan: If I understand the implication there --- Q311 Chairman: Is that what is meant by Las Vegas Sands! Mr Nathan: Chairman, that was the monopoly, as you know, for many, many years. Chairman: Okay. Thank you all very, very much indeed. It has been a fascinating session. We are very grateful to you for your time and, as I have said before, we are grateful for the fact that some of the witnesses have travelled a long way to be with us but in the case of one or two of you it is quite a long way. The Committee stands adjourned until 9.30 on Thursday morning. |