REGULATORY REFORM (GAMING MACHINES) ORDER 2003
1. This is a "first-stage" proposal
laid before Parliament on 13 March 2003. The principal purpose
of the order is to amend the Gaming Act 1968 ("the 1968 Act")
to change the ways in which value can be paid into and out of
gaming machines. A Statement by the Department for Culture, Media
and Sport was laid with the proposal ("the Statement")
under section 6(1) of the Regulatory Reform Act 2001 ("the
2001 Act"). Following a request by the Committee, further
information has also been provided by the Department in a letter
dated 23 April 2003. The letter is printed as an Annex to this
2. The 1968 Act allows three types of gaming
machine. They are: 'jackpot' machines, 'higher-value AWP' and
'lower-value AWP' machines,
and they are described in paragraphs 20 to 26 of the Statement.
The proposal concerns only the first two types of gaming machine.
3. The maximum stakes and prizes for each of
these machines are set either by the 1968 Act or in regulations
made under the Act. The 'jackpot' machine, which can be found
in licensed casinos, bingo clubs and registered clubs serving
alcohol, has a maximum stake of 50p. The level of maximum prize
varies according to the type of premises in which a machine is
located. In a casino it is £2,000, having been increased
from £1,000 by regulations laid before Parliament in December
The maximum prizes of £500 and £250 for 'jackpot' machines
sited in a bingo club or a registered club respectively were set
by regulations passed in 1998.
The 'higher-value AWP' machine, which
can be located in a broader range of premises, has a maximum stake
of 30p and a maximum prize of £25. The maximum prize money
was increased from £15 by regulations laid before Parliament
in December 2001 amending sections 34(5C) and (5D) of the 1968
4. Under current legislation, only coins may
be used to play the 'jackpot' machine (section 31(3) of the 1968
Act) and prizes can only be paid out in coins (section 31(4)).
The same is, in effect, true of 'higher-value AWP' machines (sections
34(2), (5B) and (5C)): although the Act permits payments in to
be made in tokens (as well as coins), because prizes can only
be paid out in coins, only coins can in practice be used for payments
in. The Statement (paragraphs 34 and 36) further indicates that
the wording of sections 31(3) and 34(5B) of 1968 Act implies that
both the 'jackpot' and the 'higher-value AWP' machines must be
capable of accepting a coin or coins up to the value of a single
charge for play, and that sections 31(4), (5) and 34(5C) mean
that players cannot retain winnings in the machine for further
5. The purpose of the proposal is to:
- allow 'jackpot' machines to accept banknotes
and payments by means other than cash (such as smartcards) (as
well as coins), and to give out prizes in banknotes and in non-cash
forms (as well as in coins);
- allow 'higher-value AWP' machines to accept payments
and to give out prizes in banknotes (as well as in coins);
- dispense with the implication, in respect of
both types of machines, that they should be able to accept payment
for a single game; and
- allow players of 'jackpot' machines (but not
'higher-value AWP' machines) to store winnings for use in further
play without the player having to reinsert money into the machine.
6. It is intended that the order will be accompanied
by Gaming Board guidelines for suppliers of gaming machines. The
draft guidelines are set out in Annex A to the Statement. The
guidelines are non-statutory and non-binding. But observance of
the guidelines would be taken into account by the Gaming Board
when deciding an application for a certificate of fitness (to
sell or supply machines) under section 27 of 1968 Act.
7. Under section 1(4) of the 2001 Act, a regulatory
reform order cannot be made for the purpose of reforming the law
contained in a provision of an Act if that provision has been
amended by an Act passed not more than two years before the day
on which the order is made. Because the December 2001 regulations
to increase in the maximum prize paid out by a 'higher-value AWP'
machine involved amendment to sections 34(5C) and (5D) of the
1968 Act, the Department were unable to put forward a proposal
to enable 'higher-value AWP' machines to be played using smartcards
and other forms of non-cash payments and to enable them to include
an optional retention of winnings for further play. (A similar
difficulty does not arise in respect of 'jackpot' machines.)
8. The Statement, at paragraphs 94 and 95, indicates
that, but for the two-year rule, the proposal would have sought
to amend the law in respect of 'higher-value AWP' machines as
extensively as it is proposed that it should be amended in respect
of 'jackpot' machines; and, had this been possible, then the assessed
annual benefits of the reform to the industry would have been
considerably greater - £9.5 million rather than £1.85
million. The Government now intends to make these amendments in
respect of the 'higher-value AWP' machine in a proposed gambling
bill (paragraphs 12 and 43 to 53 of the Statement). We invited
the Department to explain in more detail than that provided in
paragraph 19 of the Statement why they decided to continue with
this (limited) proposal rather than wait either for the two-year
period to expire in December of this year or for the proposed
gambling bill. In the letter to the Committee, the Department
said that it "saw no reason not to proceed with a modest
package of reform that will deliver small, but real, advantages
to the industry
" (at paragraph 4).
9. When we considered another gaming order, the
proposal for the Draft Deregulation (Bingo and Other Gaming) Order
2001, we expressed our concern about the piecemeal approach to
reform of gaming law, referring to the law on gaming as being
in "a mess".
We continue to have this concern, and we question the wisdom of
the Department in pursuing this limited proposal when a more extensive
proposal would have been possible later this year and more comprehensive
reform (in the form of a gambling bill) is anticipated.
10. The burdens which the proposal purports to
remove are set out in brief at paragraph 39 of the Statement:
- the requirement on operators that 'jackpot' and
'higher-value AWP' machines should operate solely with coins;
- the implication that 'jackpot' and 'higher-value
AWP' machines must be able to accept payment for a single game;
- the prohibition on retention of winnings in 'jackpot'
machines for further play.
The Committee accepts that these are burdens within
the meaning of the 2001 Act and that the effect of the proposal
is to remove these burdens.
11. This is described in paragraphs 57 to 66
of the Statement. The proposal will impose a new burden, namely
that operators of 'jackpot' machines which allow non-cash payment
media must make them redeemable on demand (in the form of cash
or cheque or a combination of both) at the premises where the
machines are used for gaming (new section 31(3A), (3B), (4) and
(4A) of the 1968 Act). The Statement also suggests (at paragraph
62) that further burdens will be imposed by the proposed Gaming
Board guidelines which will provide that gaming machines that
use smartcards will have to include smartcard readers (to allow
customers to check the amount remaining on their cards) and also
provide detailed rules about the operation of such machines.
12. Section 1(1)(c)(ii) of the 2001 Act requires
that where a new burden is imposed it should be proportionate
to the benefit which is expected to result from its creation.
The new burden will be imposed on the industry. It will benefit
players in that it will "provide a safeguard for customers"
(paragraph 57 of the Statement); more broadly, since the new burden
is essential to the maintenance of necessary protections (see
paragraph 20 below), without it the order would fail to satisfy
the requirements of the 2001 Act and the industry would be unable
to reap the general benefits of being able to operate machines
which accept and make payments out in non-cash media (see paragraphs
95 to 101 of the Statement and the Regulatory Impact Assessment
annexed to the Statement (Annex B)). The Committee is satisfied
that the new burden is proportionate to the benefit which is expected
to result from its creation.
13. Section 3(2)(a) of the 2001 Act allows the
creation of a new burden only if the Minister is of the opinion
that "the provisions of the order, taken as a whole, strike
a fair balance between the public interest and the interests of
the persons affected by the burden being created". The persons
whose interests are affected by the new burden are those in the
industry involved in the provision of gaming machines and players.
It is the view of the Department that there is a public interest
in increasing the efficiency of gaming machines and in ensuring
that they are operated in ways which do not give rise to substantial
risks of encouraging players to use machines excessively. In this
instance, measures which are intended to maintain protection against
excessive use are incorporated in the guidelines rather than in
14. The Committee noted in its report on the
Proposal for the Draft Deregulation (Bingo and Other Gaming) Order
2001 the objectives of regulation of gambling. And, according
to the website of the DCMS, these continue to be to ensure that:
gambling remains crime-free; players know what to expect and are
not exploited; and there is protection for children and vulnerable
people. On the premise that it is in the public interest to facilitate
greater efficiency in the industry whilst observing these objectives,
the Committee is satisfied that the fair balance test has been
15. Section 3(2)(b) of the 2001 Act requires
that where a new burden is created the Minister should be of the
opinion that the impact of the order on the burdens arising under
existing law should make it desirable for the order to be made.
The Department (in paragraph 65 of the Statement) asserts the
desirability of the proposal principally on the grounds of the
financial benefits to the industry and also the benefits to players.
The Committee is satisfied that the desirability test has been
16. This is dealt with in paragraphs 67 to 71
of the Statement and paragraphs 9 to 25 of the letter. The Department
states that there are three protections under existing law, two
of which (the £2 cut-off and payments-out in cash) the Minister
is of the opinion are necessary and will be maintained under the
proposal. The third protection (payment for a single play) is
held by the Minister to be an unnecessary protection and is discontinued
under the proposal.
The £2 cut-off
17. The first necessary protection arises from
the fact that, under the 1968 Act, players must play in coin.
Since the highest value coin is £2, a player has to make
a fresh decision to commit each new sum of £2, or less, to
play. The Department proposes to continue this protection by requiring
that machines accepting banknotes, smartcards and other non-cash
media should be programmed so that players must make a fresh decision
to commit each separate tranche of £2 (or less) from their
card, note or winnings to play on the machine.
18. Although this new requirement will be included
in the Gaming Board guidelines rather than in the Act, the Department
suggests that a protection contained in non-statutory guidelines
can in this case properly be described as "entirely equivalent"
(paragraph 17 of the letter) to a statutory protection. In support
of this view, the Department (in response to our request) provided
evidence to demonstrate the effectiveness of Gaming Board guidelines.
The Department refers (in paragraph 20 of the letter) to the recognised
competence of the Gaming Board and to the ultimate sanction of
the Board to refuse or revoke a gaming machine supplier's licence.
19. The Committees take the view that the Gaming
Board should be able effectively to enforce its guidelines but,
given that there is no Parliamentary scrutiny of the content of
the guidelines, we believe that the "necessary protection"
(relating to a separate decision to commit each new tranche of
money) would be provided for more effectively by including it
on the face of the order.
Payments-out in cash
20. The second protection under existing law
which is held by the Minister to be necessary is that players
are paid out in cash when they win. Under the proposal this protection
is lost to the extent that winnings from 'jackpot' machines may
be payable as credits to a smartcard rather than as cash. The
Department proposes to continue this protection by requiring,
under new sections 31(4) and (4A), that non-cash prizes should
be redeemable on demand. The proposal does not make it a specific
offence for an operator to refuse to honour a legitimate smartcard
credit. Gambling debts are not, however, enforceable under the
present law and, in this respect, the Committee takes the view
that the proposal involves no loss of necessary protection.
Payment for a single play
21. A third protection lost under the proposal
is the removal of the wording in the Act which implies that the
operator must allow a separate payment for a single play. In the
consultation paper it is argued that "requiring machines
which accept smartcards and banknotes to provide for players to
insert sums of 30p and 50p in coin would be redundant and needlessly
expensive for manufacturers and operators" (paragraph 50).
The Committee agrees with the Department that this is an unnecessary
22. The principal impact of the proposal will
be to extend flexibility of use of 'jackpot' and 'higher-value
AWP' machines and consequently it appears that it will not prevent
people from exercising a freedom which they might reasonably expect
to continue to exercise. The Committee is of the view that the
reasonable expectation test under section 3(1)(b) of the 2001
Act is satisfied.
23. The consultation is described in paragraphs
110 to 112, and summarised in paragraphs 113 to 152, of the Statement
and the list of those consulted is in Annex C to the Statement.
The consultation took place between 19 March and 15 June 2001,
thereby satisfying the 12 weeks recommended by the Cabinet Office.
Fifty responses were received from a range of organisations including
representatives from the industry, local authorities, churches,
voluntary organisations and academic centres. The consultation
was undertaken under the provisions of the Deregulation and Contracting
Out Act 1994, although anticipated the passing of the 2001 Act.
Section 5(4) of the 2001 Act provides that a consultation undertaken
prior to enactment may satisfy the requirement to consult under
the 2001 Act if it would have satisfied that requirement had it
taken place after enactment. Although the consultation document
envisaged a more radical reform (extending the provisions under
the proposal in respect to 'jackpot' machines to 'higher-vale
AWP' machines as well), the Committee is satisfied that the consultation
24. The Committee concludes that, save
for the point raised in paragraph 19 above, the proposal is an
appropriate use of the 2001 Act and meets its requirements.
2 AWP means amusement-with-prizes. Back
Gaming Machines (Maximum Prizes) Regulations SI 2001/3970. Back
Gaming Machines (Maximum Prizes) Regulations SI 1998/2150. Back
Gaming Act (Variation of Monetary Limits) Order SI 2001/3971. Back
24th Report, Hl Paper 81, Session 2000-01. Back