Select Committee on Delegated Powers and Regulatory Reform Nineteenth Report



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 Report.


2.  The 1968 Act allows three types of gaming machine. They are: 'jackpot' machines, 'higher-value AWP' and 'lower-value AWP' machines,[2] 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 2001.[3] 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.[4] 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 Act.[5]

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 play.

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".[6] 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; and
  • 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.

Fair balance

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 the order.

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 met.


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 met.


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 protection.


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 was adequate.

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

3   Gaming Machines (Maximum Prizes) Regulations SI 2001/3970. Back

4   Gaming Machines (Maximum Prizes) Regulations SI 1998/2150. Back

5   Gaming Act (Variation of Monetary Limits) Order SI 2001/3971. Back

6   24th Report, Hl Paper 81, Session 2000-01. Back

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