TUESDAY 2 JULY 2002
Mr Gerald Kaufman, in the Chair
SIR ALAN BUDD, Chairman, Gambling Review Body, examined.
(Sir Alan Budd) Thank you very much indeed, Chairman. I do not want to make a statement but I would like to make one very brief point of clarification, if I may. I was - and I emphasise the "was" - Chairman of the Gambling Review Body but that body ceased to exist almost precisely a year ago when we submitted our report and if, for example, I am asked questions about the contents of that report, then I shall do my best to answer them on behalf of the Review Body. If I am asked questions, for example, about the Government's response to that report, then my responses will be personal ones. I do not know what the views of my co-members are as I have not consulted them. So, if we could make that distinction, I think that may be helpful, but that is all I want to say by way of introduction.
Chairman: That was more than helpful, Sir Alan. Thank you very much indeed.
(Sir Alan Budd) The Home Office directed us to undertake this review; if you remember, it was commissioned by the Home Office. However, our report went to the Department of Culture, Media and Sport. I think they had three reasons why they wanted our study carried out. The first was the form of legislation, a large amount of which had arisen from historical accident. For example, the casino legislation in response to the serious troubles into which the industry got after premature deregulation in the early 1960s and other pieces of legislation about lotteries, Bingo and so on. These were encapsulated in separate Acts of Parliament, very often extremely rigid Acts of Parliament, where it was very difficult to make any changes as time went on. So, I think there was a feeling that it was reasonable to have a tidying-up operation as far as legislation was concerned. That was the first reason. The second reason was that perhaps there had been a change in the spirit of the age, that much of that legislation reflected what one could at least call a somewhat parternalist view of gambling and people's ability to do it. Some of these matters have changed. One remembers the earliest betting shops which were specifically designed to be as discouraging as they possibly could be because this was a rather disreputable activity which people could do if they had to but they should not be encouraged to do it and it should be done in a very restricted environment, and maybe that was no longer appropriate, maybe people's thoughts had moved on. I think that was the second reason. The third reason I think was worries about technical change and these were creating two particular concerns: one was the question of tax revenue and the fear that people were being able to avoid in particular the general betting duty by placing bets off-shore, and the second source of considerable worry which was both a source of regulatory and revenue worry was the provision of gaming on the internet and, as you know very well, under the present law, it is illegal for a UK based company operating from the UK to provide games like Roulette through the internet because the law states that the person gambling must be present where the game is played. However, there is a considerable amount of this activity going on. I am always slightly surprised when, for example, I switch to the FT.com website to see what the news is that what I mainly see is a flashing sign at the top left-hand corner encouraging me to play Roulette. So, there is a lot of it about. The problem was first, was it being properly regulated? They could not be coming from a UK base under UK regulations. Secondly, was revenue being lost because this was an activity being undertaken with an overseas based company? Of course, I am not saying that the overseas based companies are acting illegally or illegitimately, but one can see what the worry was. I think those were the three reasons for setting out on this venture.
Derek Wyatt: Let me start with the third one which is the internet betting. ICANN, the organisation that gives out e-mail addresses, is in disarray and the Government are only just getting board members on that. There is not a worldwide body such as, if you like, the IMF, of authority; so how do you think that a British Government can, as it were, badge sites that say, "Listen, if you bet on this site, we do not guarantee it but somebody is going to guarantee it" because who guarantees that you will get your money? That is the problem. Your credit card number gets taken, you win £50 and you never get your bet back. How is that going to get resolved by a UK Government acting on its own?
(Sir Alan Budd) I know that Mr Wyatt has a considerable interest in IT matters and knows far more technically about them than I do, but this is the challenge. I do not think anyone is claiming that this worldwide activity can be controlled and, as you know, it is extremely difficult to get international agreement on internet matters as far as I can understand. Child pornography is one of the few where people have seriously tried to do something about it and even that is almost impossibly difficult. I think the best that we are hoping can be done is that while there will continue to be an almost infinite number of uncontrolled sites, it will be possible to set up a badging system either through a portal or through the allocation of some form of certificate to these providers which does say to people that, whatever else is going on here, if you bet with this particular provider of gambling, they have registered with our proposed Gambling Commission; we know about them; we know who they are; the people invested have passed the fit and proper requirements; they are inspected and they are controlled and they have procedures in place which prevent the sort of problem to which the Chairman has drawn attention of handing over credit card numbers. It is a very, very serious challenge. What we are hoping is that that is better, that it is a step forward compared with the present stage of more or less complete deregulation.
(Sir Alan Budd) We have not made a recommendation about at what level the regulation should be. In reply to your point on VAT, which is of course a completely valid one, it is that sort of problem which is leading increasingly to the taxing of gross profit margins; so this is something that can be recorded through the accounts of the company involved rather than through the individual transaction. I am not an expert on that type of tax issue. The more that can be done internationally, the better. That must be the case. I think this is an area in which we do have subsidiarity and we can have our own legislation.
(Sir Alan Budd) In a somewhat cowardly way again, we did not give any answer to that question. We did not like the idea, although this is a matter for public policy, of one particular area being given a monopoly and certainly I would agree with you that, if it were a monopoly, it should not be given, it should be auctioned and this is a matter on which Professor Collins, who has given evidence to you, has written a great deal based on his experience with South Africa. I do not know how many of these casino resorts there could be. That is why I am very happy to leave this to the market and leave this to people to venture their own capital. That is what to me should be done and I hope there will not be too much Government involvement in trying to reach this decision.
(Sir Alan Budd) I must admit that I had not even thought about that matter and I am not sure that my views on it would be helpful; it would be embedded in so many matters of public policy. I do not think my views are worth hearing on that particular question.
(Sir Alan Budd) I do think it is inasmuch as the Regulator is concerned. My views on the Lottery, which are perfectly familiar ones and not mine uniquely, are that they undertake three activities: they promote an activity which raises money for good causes; they regulate this activity; and, every now and then amidst great publicity, they let the contract to people to undertake this activity. To me, these are three entirely different roles and part of their problem has been to find one small group of people who can perform them all. I think it would clarify matters if the regulatory part of that task were taken away from them and given to the Gambling Commission. I feel this particularly strongly if they accede to requests from firms like Camelot to introduce a number of new opportunities to provide money to the Lottery, Lotto and so on, which look increasingly like other forms of gaming.
Michael Fabricant: Your report talked about the whole promotion of gambling and how it should be controlled. Are you comfortable with the way in which the BBC promotes gambling through its promotion of the National Lottery, free of charge I might add?
Mr Bryant: Not free of charge, paid to do so.
Michael Fabricant: What, the BBC are now receiving? They did not originally.
Mr Bryant: They pay for it.
Michael Fabricant: The BBC are paying? That is the point!
Chairman: The BBC pay Camelot.
(Sir Alan Budd) I can well sympathise with people who think that is somewhat unfair, that the National Lottery and Lotto get so much free publicity when others do not.
(Sir Alan Budd) Part of our recommendations are that there should be greater freedom to advertise gambling generally; so we certainly would not exclude the National Lottery from that.
(Sir Alan Budd) I think you asked me two slightly different questions. We certainly proposed that decisions about premises and so on should be devolved; that is a general recommendation which the Government by and large accept. What they do reject is this particular power to impose a blanket ban and your question is really about this latter particular power.
(Sir Alan Budd) What we were trying to do here was to recognise a very difficult issue and it was a very difficult issue for us. There are people whose views one would certainly respect who do not like gambling as an activity. They simply do not like it. They think that a society in which everywhere you go there are casinos is not an ideal society. Some parts of the country may wish to say, "We do not want it here." Incidentally, we never suggested that people who already had the power to have betting shops would have them removed, that was not our proposal, but that there would be a part of the country where local people would say, "We do not like it and we are not going to have it." This was concerned with what I subsequently called, "the social environment". It is a very difficult, moral and philosophical issue about whether you should allow people to do that, but that is what we had in mind, that there would be people who wished to exercise this power. As it happens, the Government disagree with us.
(Sir Alan Budd) We did not consider it but I do not think I personally would object to it. Again, part of people's freedom, which we hope they can exercise, is about where they want to live and in what sort of environment they do want to live. What we were worried about was having a significant change in environment imposed on people who thought they had come to a lovely quiet part of the country in which to live. It is a very, very difficult one because we have to balance that against a matter we took very strongly, which was freedom of competition and freedom of entry, and getting that balance right would have been a very difficult matter under this blanket ban proposal.
(Sir Alan Budd) Absolutely.
(Sir Alan Budd) I think it is desirable that people should understand notions of odds. I am not sure I do completely agree with you about what it is that people know or do not know. Take Bingo players, for example, a large group of people who are gambling undoubtedly and on a regular basis. It would be extraordinary if people did not realise that, on a regular basis, they lose. Over the period of a year, they lose. They know that perfectly well and, if you asked them, they would tell you. They may say, "Yes, I lose but I think I am going to win tonight" in some sense, but again they really know that that is not true either. They have a thoroughly enjoyable evening out and they have the excitement that, every now and then, they win a lot of money. I even have a rather complicated theory, of which I have no evidence at all, that they use this as a way of accumulating sums of money for some particular purpose. It may seem a rather costly way of doing it. If they want to have money for a holiday, what they do is play Bingo and, every now and then, out comes the money for a holiday. It is completely irrational but it is a way of turning a stream of money into a lump of money which they might not be able to achieve if they were trying to save it. I am not being agreed with by everybody here, but again this is completely harmless.
(Sir Alan Budd) I think the same applies. Every now and then, we know there is the small issue of problem gambling but you are saying not, it is the generality. I think the generality know that they lose when they gamble.
(Sir Alan Budd) There are a lots of areas in which we do not educate people. I wish a lot more people understood economics and I certainly wish that a lot more people understood finance and what they get into when they undertake financial transactions. This is another part of it. I can very much sympathise with you that one would wish that, as part of the general education, people had understood some basic principles about odds and economics and finance as they would be extremely useful and would remove a great many difficulties into which people later fall.
(Sir Alan Budd) Yes, life skills seems a good expression.
(Sir Alan Budd) I do not think so. There clearly is a risk that people will stop playing Bingo and go to the greater excitements of the games in casinos that will be possible if our proposals are accepted. So far, the groups that go to Bingo and the groups that go to the casinos have been rather distinct. As you say, it is an entirely different sort of experience and I believe that that will continue. I do not think that the Bingo industry, which is of course having a hard time, we know that, will be particularly hit by the adoption of these proposals.
(Sir Alan Budd) I think it can be a very different kind of activity and, you will remember very well, the evidence of where problem gambling arises does suggest that it is more strongly associated with machines than with these other forms of activity that you have described.
(Sir Alan Budd) You say it is Treasury led -
(Sir Alan Budd) The original documents launching the review body referred to the revenue issue; so that was not in any sense hidden that that was one of the reasons that was given. It certainly was not Treasury led in that sense; the Treasury was not a particularly interested party in all of this; the Home Office was the lead department and then -
(Sir Alan Budd) That may be the case but, as far as I am concerned, it is completely coincidental.
(Sir Alan Budd) I did not start with any views on whether this was a good or a bad thing.
(Sir Alan Budd) Our conclusions of the report are that the level of restrictions was unnecessary and -
(Sir Alan Budd) To me, all restrictions have to be justified. I personally start from the presumption of human freedom; that is my starting point. Then I look at any restriction and ask, what purpose does this restriction serve? There are of course a vast number of areas in which restrictions are justified but one must always ask the question and one must certainly do that with the restriction of gambling as with any other activity. Of course, after our report, this is still a very highly restricted activity. It is hardly a free activity at all. So, we are leaving an enormous element of restriction in place which we think is justified, but it must be justified.
(Sir Alan Budd) No.
(Sir Alan Budd) It is a reason, when one deregulates, for trying to ensure that the sorts of problems that have arisen elsewhere do not arise here, and a large part of our report of course is concerned with that and the largest part of the report, as I am sure you know, is about problem gambling.
(Sir Alan Budd) Certainly it is addressed -
(Sir Alan Budd) A great many of our proposals are -
(Sir Alan Budd) Part of our proposals are of course to try to discover more about the nature of normal and abnormal gambling. There is certainly a great knowledge there, that is absolutely true. We made a number of proposals in the name of social responsibility which impose a specific duty on those who provide gambling to ensure that, as far as possible, the results of that activity are not adding to problem gambling and, in particular, we give the Gambling Commission this responsibility. That is completely new. The Gaming Board, which is of course an absolutely excellent institution, has not had to concern itself with that matter. Industries have done so on a voluntary basis and we are trying to put this right at the forefront of the gambling industries' concerns.
(Sir Alan Budd) I am sorry, the Board?
(Sir Alan Budd) Do you mean the Gaming Board?
(Sir Alan Budd) They have rejected our proposal on that matter.
(Sir Alan Budd) Again, this is where I move to the personal area and the Board will be giving evidence to you after me.
(Sir Alan Budd) What I think about this is that we were being cautious against the possibility. We felt the evidence was convincing enough to be cautious where the claim of gaming machine use by children was concerned. So, in pursuit of caution, we made a number of recommendations which did include the proposal that gaming machines, which do seem to be a potentially most difficult part of this activity, should be removed from areas like cafés and so on where children could wander in casually and play on them. We did that in the name of caution. The Government, no doubt also wishing to behave cautiously, do not believe that that degree of caution is necessary. Yu will of course have the chance to ask the Minister about that.
(Sir Alan Budd) I am not sure whether you are accusing me of misbehaviour or -
(Sir Alan Budd) That is fine, they must speak for themselves.
(Sir Alan Budd) My answer was that we were cautious in this regard. The DCMS have chosen to be less cautious and I cannot possibly answer for them.
(Sir Alan Budd) Thank you. May I say, on a personal matter, Chairman, I do hope I will have an opportunity to entertain you in the near future in your old college.
Chairman: Invitation accepted!
Memorandum submitted by The Gaming Board
Examination of Witnesses
MR PETER DEAN, Chairman, MR TOM KAVANAGH, Secretary and MR GRAHAM WHITE, Chief Inspector, The Gaming Board for Great Britain, examined.
Chairman: Gentlemen, thank you very much indeed for attending. We have a very busy final session today.
(Mr Dean) How the stamp of approval might ...?
(Mr Dean) The notion is - and other countries have tried this with some success -
(Mr Dean) Yes, Australia in particular. The notion is that there will be a process whereby the Gambling Commission will investigate applicants for this sort of licence in very much the same way as they do currently for terrestrial operators for fitness and provenance, that their systems will be investigated also and the Commission will have to be satisfied that those are in order, that the games are fair and so on and so forth. That having been done, the games having been approved, these operators will be authorised in the same way as terrestrial operators are now, and they will have a stamp of approval either by going through the Commission's portal or by some other means. That is the way in which it will be done in practice. Of course, we have not worked out the fine detail of this but it seems entirely practicable.
(Mr Kavanagh) May I just add a comment there because you mentioned off-shore sites. The intention is that all of these sites will be based in Britain. The Gambling Commission would not be licensing off-shore sites. The requirement would be that all the systems - the gaming systems and financial systems - should be run out of Great Britain so that it can be properly regulated.
(Mr Dean) The system does two things. First, it enables British residents to have access to gambling sites and internet gambling sites which they know have been authenticated by a British board. Of course it does not prevent them from going to any one of the hundreds of sites which are and will continue to be available from overseas, but it gives them that option. Secondly, it enables reputable British organisations to establish reputable internet gambling sites here. It does not do away with the mass of possibly unrelated sites from overseas.
(Mr Dean) I think it possibly is but gambling is an area which has hitherto not been tackled by the EU and is, as Sir Alan was saying earlier, extraordinarily difficult to get any sort of co-operation on these matters. Views differ as to what is and what is not appropriate in the gambling arena. I think it is extraordinarily difficult to get EU co-operation and, even if one did, there is plenty of the world outside the EU and one is only shifting the problem.
(Mr Dean) If legislation should follow the Government's proposal?
(Mr Dean) Broadly we supported the Government's proposal and broadly we supported the Budd Report. It is not quite true to say that we had no concerns with the status quo. There were a number of concerns which we have voiced over a number of years. Broadly, we support the current proposals. We have one or two reservations, in particular relating to gaming machines in single site outlets such as fish and chip shops, taxi cab business and so on.
(Mr Dean) I should preface my answer by saying that we do not currently regulate these sites. So, to some extent, our knowledge is secondhand. What seems quite clear is that illegal machines do appear in such sites. They appear in unauthorised venues and, when the venues are authorised, there will be unlicensed machines there. These matters are brought to our attention from time to time by properly authorised licensees. We will seek to involve the police or the local authorities and Customs & Excise and, from time to time, raids are carried out and the illegal machines are removed. So, that is one area of difficulty. The problem really is with such an enormously diverse possibility of sites, it is extremely difficult to control.
(Mr Dean) We make no comment about that. Our comment with regard to AWPs in fish and chip shops and the like is simply that, at the moment, there is no adequate control over them at all; they proliferate and they are a source of illegality that is currently under control that needs to be controlled and the simplest way of controlling them, so far as those single sites are concerned, is to ban them.
(Mr Dean) I do not think I am saying that, no.
(Mr Dean) The illegality arises because there is no sufficient follow-up and illegal machines do appear. Illegal machines appear in places which have licences and legal machines appear in places which are not licensed. That is a matter of fact.
(Mr Dean) Clubs and pubs have made that argument and I have sympathy with it. I am not sure that I have heard that argument from fish and chip shops and taxi cab offices.
(Mr Dean) If it is a registered club, then it might indeed be entitled to machines under the current rules.
(Mr Dean) Yes.
(Mr Dean) Yes, indeed but, being realistic, unless one has some limitation over the venues where these machines can occur, it is actually an impossible task to regulate them.
(Mr Dean) I will start off by answering that and then leave it to my colleagues. First of all, we do not have currently the casino slots with unlimited prize on payout which are proposed to be allowed and so our jurisdiction at the moment extends to limited prizes -
(Mr Dean) It could.
(Mr Dean) Indeed, we have and we do have views on the so-called near miss situation.
(Mr Kavanagh) I think there is a point worth making here. When we put in our evidence originally to the Budd Report, we said that these machines should operate randomly, as indeed they do in the States, Australia and places like that. We have also raised the question which is still for consideration as the legislation goes forward as to whether the displays on those machines should also be random and, as they become random as well, you cannot programme into them and that is one of the things we want to pursue in the legislation itself or in the codes of conduct that go with it for these gaming machines and that would address the point you are raising.
(Mr Kavanagh) The Government have accepted the randomness point. We are not at the level of discussion yet where the discussions about the near misses and things have been featured in terms of the details. That is something for the future.
(Mr Dean) I think that sounds a little far-fetched. Slot machine players are more sophisticated than one sometimes gives them credit for. Certainly experienced slot machine players have a very shrewd idea of the odds that are paid out.
(Mr Dean) I think that Bingo players are pretty sophisticated too. They know how much they are going to lose.
(Mr Dean) The Board does not have a view on such a philosophical matter as such. My own answer to that would be that you cannot answer that question "yes" or "no". The level of protection has to relate to the particular activity under consideration. So, as far as gambling is concerned, one knows that a small proportion of individuals will have a problem with gambling and I think the measures instituted have to reflect that.
(Mr Kavanagh) If I may just add a point which I think partly answers Mr Fabricant's point, one of the things that the Board is quite keen on is to create the obvious things like being as transparent as possible and, for instance, we have just recently agreed a leaflet with the casino which has been published for the first time. I think it is possible that more could be done on gaming machines and such education that a player has about statistical probability, but at least educating them on the different edges that there are on the different games they play; I think more could be done in that way.
(Mr Kavanagh) You do not. The parallel I would give is similar to the fact that pubs have to display all their prices. If you want to know their price before you buy a pint of beer, you can find out. You are not forced to because a lot of people just go in and buy a drink. The player should have the right to be able to find out what the odds are on the various games they play.
(Mr Kavanagh) Some care, some may not, but there is a question of being transparent to the players if they want to find out. It has been the position in the past that you did not know what the odds were on these games without buying a textbook which would tell you. That information is now available in casinos. It is just making it available to those people who want to know.
(Mr Kavanagh) I think I would say it is fair that the players should know what the odds are of winning that big prize in order that they can make a decision as to whether they buy a ticket or not.
(Mr Kavanagh) In some ways, betting is almost the most transparent of the sports in that respect, but you do not know the house edge particularly on a Black Jack game or a casino Stud Poker game unless you take the offer to find it out.
(Mr Kavanagh) It can be fixed if the game is not being fairly and properly run and it is part of our job to make sure that it is.
(Mr White) Chairman, may I comment there?
(Mr White) The best policeman, on the fairness and transparency of the game, is actually the punters themselves. They will be the first to complain to us or to the management that something is not right because it is money.
(Mr Dean) Yes, I think I would. First of all, the proposals do not envisage a wholesale expansion of all types of gaming machines in all venues. The Board does believe quite strongly that, in principle, gambling should be offered in places which are licensed to offer gambling. There are certain exceptions to that and they are age old exceptions, but they are limited exceptions. Pubs are one exception, clubs are another exception, but the numbers of machines in such venues are limited now and it is envisaged that they will continue to be in the future. I think that is right. You have heard what our view is in relation to machines in fish and chip shops and taxi cab offices. So far as casinos are concerned, there is indeed the prospect of significant expansion in relation to the unlimited prize/unlimited pay-out machines, but those machines will be restricted to casinos, casinos being a highly regulated environment which will have gone through all the fit and proper tests proposed by the Gambling Commission which will regularly inspect them and which will be subject to obligations of social responsibility enforced by a code. So, I do not quite see the spectre which you are envisaging.
(Mr Dean) I certainly recognise the issue of problem gambling and that is a problem now and will continue to be a problem.
(Mr Dean) There is undoubtedly a likelihood that the increase of access to gambling will increase the incidence of problem gambling, but one comes back to the dilemma which the Chairman was outlining a moment ago which is, to what extent do you regulate to cater for a small minority or to what extent do you provide for the majority but nevertheless put in safeguards -?
(Mr Dean) No. I think one of the good things about the proposals is that there will be improved controls in relation to young people; it will become an offence for somebody underage to gamble and it will be an offence for any operator to allow such gambling. So, there are increased restrictions in that respect which is desirable.
(Mr Dean) I believe that they are very difficult to police in fish and chip shops and the taxi cab offices and that is why -
(Mr Dean) Again, how those numbers are going to be controlled is something which is currently under discussion amongst the DCMS, the industry and the Gaming Board. That certainly has to be worked on. It is a challenge. One has to weigh that against the current hard evidence of abuse and there is not a lot of hard evidence of abuse.
(Mr Dean) I think if there is not a lot of hard evidence at all, then that is an argument of defence. I would argue against imposing wholesale legal restrictions. As I say, there are new restrictions in relation to children and they are good.
(Mr Kavanagh) If I may add a point that is relevant there. Under the current law, it is not illegal for a child to play a jackpot machine in a club and it is not illegal for club owners to allow them to do so. One of the benefits of what is being proposed is that that will all change and both of those will be committing an offence and, with the conditions or restrictions that are proposed being linked to licences for those machines, that is a distinct improvement over where we are at the moment.
(Mr Kavanagh) At the moment there is no duty and the Board has no responsibility in respect of clubs. Your point earlier is a valid one, that the larger number of machines there are on the single sites in small blocks, the harder it is to have good regulatory controls when they are concentrated on licensed premises. That must be right.
(Mr Dean) I said there was a likelihood.
(Mr Dean) Yes, I did.
(Mr Dean) The industry should bear certainly the major burden of that and that is what is proposed under the Government's policy statement.
(Mr Dean) The Board has no particular figure in mind. The Budd Report recommended a figure of £3 million a year for the Gambling Trust and that seems a very fair figure.
(Mr Dean) One has to start somewhere and one of the things that the Gambling Trust will do of course is carry out this -
(Mr Dean) Well, in principle the industry should pay for the regulation, as indeed it does at the moment, and that burden must be shared. How it is shared is obviously a matter which will need to be gone into very carefully.
(Mr Dean) Among the industry players.
(Mr Dean) I do not know or no, I would not necessarily think that it would. There are estimates in the Budd Report about the cost and indeed the Government paper about the cost of the Gambling Commission. It will cost a good deal more than the Gaming Board currently costs, but it will have a much enlarged remit and there will be more gambling operators contributing to it and it will be an expanded operation, so I myself would not believe that the burden on the industry should necessarily be significantly greater than it is at the moment.
(Mr Kavanagh) The fees that the Gaming Board and the licence set at the moment are very broadly set to recover costs. I do believe there is a separate problem about the particular sort of fees that you are talking about which local authorities set which are currently very much lower, but they are a different set of licence fees.
(Mr Dean) The issue of the prize competitions is something on which the Government is going out to consultation right now and that is left over from the Budd Report. The Budd Report made certain recommendations in that regard and the Government wanted a further look at it and that is being consulted on right now.
(Mr Kavanagh) I think we made clear in our evidence that we think a lot of these competitions are currently illegal lotteries. A lot of them are fairly harmless and in that sense could be legitimised, but there are categories of them which are far from harmless which we think need to brought under better control than they are at the moment.
(Mr Dean) I have to say I am not quite sure as to what level of detail company accounts go right now, but company accounts are available.
(Mr Dean) To be particularly blunt, I do not think it would. I do not think gamblers care how much money the operators of the premises where they gamble make. I think they will care to a certain extent about the particular odds that they get, although I think that is only to a limited extent too. I rather doubt that they will care about the profitability of the enterprises, but it is a matter of public record anyway. A gambling company has to disclose its accounts publicly, so anybody can look and it is not a secret, but I doubt whether many gamblers would bother.
(Mr Dean) I would need to be persuaded that the public do not have adequate rights actually now to get whatever information they really legitimately should have.
Alan Keen: Well, I have listened to the media over the last few days and perhaps you would agree with me that companies should disclose in their company accounts exactly what has happened both in this country and in the United States.
Chairman: Well, thank you, gentlemen, very much indeed. We are most grateful to you.
Memorandum submitted by the National Lottery Commission
Examination of Witnesses
MS HARRIET SPICER, Chair, and MR MARK HARRIS, Chief Executive, National Lottery Commission, examined.
Chairman: Welcome here today. We are very pleased indeed to see you.
(Ms Spicer) The word that nearest approaches philosophical discourse which comes to my mind is "fairness" in this. I obviously have just sat hearing the words of somebody whom I admire hugely, Sir Alan, and his recommendation was that he felt it perfectly proper for the entirety of regulatory activity to come within one body. Various phrases in A Safe Bet for Success where the Government had to adjudicate effectively between the bi-polar activities of lottery and gambling came to mind when I was thinking about the task which would be presented to a unitarian regulator. When they chose to decide about side-betting, for instance, as they did, the words were, "given lottery betting opportunities available to bookmakers", so there was already a judgment which had to be made which took account of the different playing fields, and other phrases come up in A Safe Bet. To the extent that one can have different and level playing fields, adjudication between the two is required and it is the possibility of doing that fairly which I think is the issue and actually I do not believe, as an interested party, as I must be from the Lottery Commission, that I would go further other than to say that I perceive challenges in the totality of the activity.
(Ms Spicer) The challenges?
(Ms Spicer) The challenges are balancing the natural, agreed by the Government in the recent documents, monopoly and protecting the monopoly, as we have perceived that exists, as against the commercial market-operated activities of a wide array of different gambling and commercial interests, a lottery operator operating for the public benefit as against the commercial interests.
(Ms Spicer) Absolutely none. Thinking about this, there is the possibility of the duties of compliance and checking, as we do, that the very last penny goes to the proper place, the good causes account, but the higher up you get within one body, there must become a board, a board of trustees, as is proposed, and they will have the potentially invidious task of deciding between two competing organisations or bodies, to call gambling a whole body, but between gambling and a Lottery, and I think the potential for those regulated to perceive bias may exist.
(Ms Spicer) One of the interesting things is that we are looking at a second wave, which is a big new change for us, but we actually have a very young Lottery compared with those in Europe. The British National Lottery is a real baby and we, therefore, have available to any operator, I believe, the potential to grow the game, to grow the money for good causes without recourse to heating up anything, and you termed it a "gambling element". I believe that certainly in the life of this licence, there are a lot of opportunities available to Camelot that will not require us to license a very different order of game.
(Ms Spicer) There will always be a challenge to maintain the money for good causes, that is right. It is a substantial task, but, as I say, I do believe within this licence that there are avenues for the operator. They have proposed and are discussing a Euro game which we hope will be a step change for the Lottery and its revenues within the life of this game. The interactive offerings should equally make a substantial contribution, and in the much longer term, which I also hear you asking me about, I believe that there may be a change in the gambling environment. Just as Sir Alan referred to the spirit of the age, there is a change, the Lottery in itself brought about the change to the perception of gambling activities. Post-Budd, with the implementations of A Safe Bet, there may also be a change and after that the Lottery may evolve, but for now I would repeat that we do believe that the operator has available to them many opportunities to grow.
(Ms Spicer) I would hope not. I think a really intelligent, creative, innovative portfolio offered by a lottery operator should be able to address the needs and to the extent that they do, I also believe that is a good thing in and of itself.
(Ms Spicer) Well, I think, if I may draw a distinction, there is the game of Keno and then the game which is expressly prohibited is Fast-Draw Keno where you can sit and a draw comes every five minutes. I do not know to which of those two you refer.
(Ms Spicer) We actually have a direction not to have more than one draw.
(Mr Harris) In our statutory responsibilities and terms of licensing individual games, whilst the Commission is charged with maximising returns for good causes, that is a less important priority than the priority of making sure that the games are run with all due propriety and the interests of players are protected. We have a specific direction from the Secretary of State that the Commission shall not license games which it believes are likely to promote excessive playing. The Commission have looked at the range of games available and certainly at the time of the last competition said that its starting point is that games that have a very high frequency of play, and Fast-Draw Keno is often played every five or ten minutes, games like that we would not expect to see as part of the National Lottery at the moment. Now, that does not stop an operator coming forward with proposals, but they would need very clearly to be able to satisfy the Commission that these games would not promote excessive play before such time as the Commission would be able to go out and license those games.
(Mr Harris) The position the Government has taken in A Safe Bet for Success in terms of lotteries generally, and that is not the National Lottery, but other lotteries, is that it would not expect draws to be more often than every day, and I think there is good reason for that to be a starting point for the Commission and certainly the Commission has considered the possibility of daily games. The proposal has not yet been brought forward, but I do not think the Commission would automatically say, "This is likely to cause a problem", but draws which are much more frequent, it would have much greater concern about.
(Ms Spicer) Well, as I mentioned, there are the two possibilities of an interactive delivery, and ----
(Ms Spicer) No, it is not.
(Ms Spicer) No, it is the possibility of playing on your computer or on your telephone or television, interactive television.
(Ms Spicer) The video lottery terminal is one which is in a gambling environment. These computers actually run similar games to scratch cards which are being run now.
(Ms Spicer) Yes, they would. From the moment of the ITA, we did include the intention that the Lottery should be able to keep pace with the interactive activities of the wider gambling environment and we requested that any bidders should pay attention to the possibility of delivering games on interactive media.
(Ms Spicer) I think there are two things there. The difference between the video lottery terminals is that they run to commercial success, and nobody would run them otherwise, with very large linked prizes and that is the inherent difference between them and the scratch cards and the level of prizes which will be offered on computers. The second point that was made was that about control of play when you have a computer in the home and there are two ways in which that is being addressed, and in fact we are in discussion about this, so matters are not finalised and the licence has not been agreed. We are agreeing all the best possible surrounding protections to this activity, the first being the existence of a "Net nanny". That is a wildly untechnical term, but I think it is one that serves, I hope, an understandable purpose in that any home can include or exclude access to a site from their computer. Once the decision has been taken by the household which route they will go, whether to have access to that site or not or whether their children can be excluded from it by a password, then we are working on a substantial and very thoughtful list of controls around play, such that you cannot have too much money going into your play wallet if you win a prize, that you set your own limits for the amount of play, that you are, therefore, alerted when you reach that limit; a great many, if you like, specifics on that which we would be more than happy to go into and we are working on a great many protections around this activity.
(Ms Spicer) I hope I would not look sophistical if I say precisely the answer to that question is the area of regulation. I have no desire personally as the regulator of the Lottery to exclude or decide who should do other things. I believe that is quite properly a decision for others, for the Government. What we did to the best of our ability was to display evidence, facts and numbers as to what was our best-informed and calculated guess, working with Camelot figures, as to what might happen to the Lottery and beyond that point it became a decision for public policy.
(Ms Spicer) I would hope to achieve a balance because an enormous amount is achieved by charity lotteries and one can never feel comfortable at wiping something out entirely, so I think the task would be to achieve balance and we would hope to do that.
(Ms Spicer) I hope I have understood your question properly. If not, please ask it again. What I was actually thinking was the kind of balance was that achieved by saying, "Yes, we address the requests of society lotteries by doubling their turnover and prize limits".
(Ms Spicer) No, so we have tried to achieve a balance, but chosen to go down the route of acknowledging the monopoly position of the Lottery for the public good and have chosen not to free it up entirely.
(Ms Spicer) Hypothetical questions - I am not the person. I have not been sitting and going through all the due diligence that I would be obliged to go through in order to answer that question properly.
Michael Fabricant: Well, maybe not St Giles' Hospice, but the principle.
Chairman: Michael, I think we have got your point.
Michael Fabricant: I have not got her point though.
Chairman: Because she is speaking within her remit and she is speaking very specifically within her remit. It might well be argued that her remit should be broadened, but it is not for her to say that. She operates under the legislation.
(Ms Spicer) Well, I am very sorry not to be able to say, but, Chairman, you have put my position perfectly, if I may say so. Thank you.
Chairman: You managed to get your constituency stuff in quite well, Michael!
(Ms Spicer) I would hope to be able to do both.
(Ms Spicer) No, not at all. We thought very carefully about what the role of the Commission was in response to the report. We chose to give our informed opinion to the Department and to review for the thoroughness, methodology and assumptions within the work that had been supplied by Camelot from two different organisations, PWC and (?) Centre. We made absolutely no attempt to lobby or come up with specific proposals, but merely to give guidance as to the likely possible outcome.
(Ms Spicer) I think that that figure of itself was put together with all of the challenges on the Lottery, so when we are talking about balance, it is not even as simple as one balance against another. It is not only the society lotteries, but there is also bingo, the entirety of the changed environment that will exist for the Lottery. All of these things were taken into account when the Government came down with their decision.
(Ms Spicer) Well, when I said that I hoped to work for both, by that I mean only the people as they choose to engage with the Lottery. In our duties we have as a priority the interests of players and those always come first before good causes. One must have a fair game which advantages players, so to the extent that I said I have a duty for the people in the widest sense, that is as they engage with the Lottery. Again I do have recourse to the clarity of our remit in this matter.
(Ms Spicer) Well, I think there one would look to the benefits of the oligopoly and the size of the game that the Lottery can offer because it does trickle back down through the distribution bodies to a very wide range of good causes, and appreciation of that factor is the one that can meet your concerns for the local hospice and so on.
(Ms Spicer) To an extent that is true. I think we welcome the fact that not only is the gambling environment being reviewed, but the relicensing of the Lottery and also the distribution bodies and certainly that is a considerable part of the operator's long-term development of the good standing of the Lottery. I think we really welcome that in the review as well.
(Ms Spicer) May I say it felt positively gallant, if that is not an inappropriate remark to make to you, Chairman.
Memorandum submitted by HM Treasury and DCMS
Examination of Witnesses
RT HON RICHARD CABORN, a Member of the House, Minister for Sport, MR ELLIOT GRANT, Head of Gambling and National Lottery Licensing Division, and MR DAVE BAWDEN, Project Manager for the Gambling Review, Department for Culture, Media and Sport, examined.
(Mr Caborn) I will.
(Mr Caborn) Thank you very much. Can I just introduce my officials, who are Dave Bawden and Elliot Grant, two officials from my Department who have transferred from the Home Office to DCMS not so very long ago, a whole new experience for them.
(Mr Caborn) Can I say, first of all, apologies for the Secretary of State and I will take your good wishes back to her, but I know also that the Committee had actually rearranged this date to suit the Secretary of State and that she was very thankful for. I know that actually she wants me to say how much she also welcomes the Committee's inquiry into our gambling proposals and, as obviously the Committee know, these are very important and indeed will be far-ranging changes and, therefore, it is right that the Committee and indeed Parliament as a whole should involve itself in the debate and considerations surrounding them, and I hope, Chairman, you know that there will be a debate on Friday on the floor of the House. Indeed our approach to these reforms, I hope, has been seen to be inclusive and indeed I think one of the facts which shows that is that we have had something like 5,000 responses to our consultation document and I think that clearly demonstrates that we have been quite inclusive. Indeed we will continue to have a dialogue with a wide cross-section of stakeholders and with those who have an interest in these issues as we develop our detailed implementation arrangements. Those on the Committee must concentrate at this stage on particular aspects of the proposals, but I hope over time you will be able to bring your scrutiny to bear on the full range of changes set out in A Safe Bet for Success. As the Committee knows, the gambling industry is an important one and, if I can just give you four statistics, the annual turnover is £46 billion a year, gross profit is £7.2 billion and indeed to the Exchequer it is about £1.5 billion annually, but I think, more importantly, it actually employs over 100,000 people in this industry. Therefore, it is a significant generator of economic activity and its products and services provide pleasure and recreation to millions of our citizens. From the Government's perspective, our proposals, as put, are about striking new plans which are in A Safe Bet. The proposal for controls and restrictions, which we believe are past their sell-by date, indeed will lead to this industry getting on to meet the demands of the customer and it has been significant in the discussions that gambling has effectively now become part of the mainstream leisure industry and we believe, therefore, the law should reflect that, but at the same time maintaining in some cases the considerable strength and protection needed to ensure that gambling is, first of all, quite free, that children are protected and that people who gamble are treated fairly. We also significantly believe that our proposals safeguard the valuable contribution that the National Lottery pays to good causes and, therefore, in that context we do welcome the scrutiny that your Committee is putting to these proposals.
Chairman: Thank you very much, Mr Caborn.
(Mr Caborn) Well, I think what we have said is that we want to distinguish between amusement and indeed gaming and gambling and very clearly we thought that that needed to be clearly shown in our proposal and we have done that. Therefore, amusement, the prizes, we very clearly distinguish between the two because it seems to me that it is part of our heritage and, therefore, we believe we have accommodated that in a more effective way. In terms of the gaming machines, then we have graded those again we believe because in the reorganisation and moving the whole of the gambling industry into mainstream leisure, there needed to be some clear qualifications and we have done that, as I hope you can see, in pubs and the various categories, moving up through the licensed authorities and then into the casino, so we believe it is a very logical sequence, but we have distinguished between amusement and gaming.
(Mr Caborn) Well, because, as I say, we have distinguished between what is amusement and gambling and they are unlicensed premises which will have access to them by juniors and, therefore, we felt it right that they become amusements, not gambling, amusement with prizes and, therefore, the rationale is, as you say, for the 10p maximum stake and the £5 prize and that is the rationale behind it.
(Mr Caborn) At the end of the day it is a commercial judgment to be made and I think to some extent it will be how the local authority approach that as well and they have quite a power in planning. I think again, and I digress a little from your question, but we have tried to bring the local authorities into the main regulatory part of that side of the Commission both in terms of planning and the licensing. Why we do that is because we believe that local authorities have a wide responsibility for the regeneration of their areas and we want to give them the toolkit to do that, so if a local authority believes that gambling could be part of its economic regeneration development, then it has the power to do that, particularly through the planning regime. Again at the end of the day it would be whether they can attract the private sector to come into that and that is no different from anything else they may want to undertake.
(Mr Caborn) No, we are being realistic. One of the things which has actually struck me in this particular review is the lack of real orchestrated opposition, and I ask myself the question why. I think to a large extent in this area it is because of the advent of the National Lottery where 70 odd per cent of the richest public gamble in one form or another, so, therefore, there has been a change in society and what we have done in the consultation since is to reflect what is happening in society. We are doing that and that is why I say we are moving gambling from the seedy side of the street into the mainstream leisure and we are legislating to that effect.
(Mr Caborn) We have already made a number of changes and if I run down this, with casinos, we are removing the automatic ban on live entertainment by the 31st of this month, and also allowing alcohol on to the gaming floor and that is already implemented. With bingo, increasing stakes and prize limits and that will be in by the 31st July. On society lotteries, doubling the stakes, sales and price limits, that has already been implemented. On betting, removing restrictions on food and non-alcoholic drinks in betting shops, that will be done by the 31st July. On machines, we are permitting notes and smart cards in machines by the 31st March 2003, and with the pools we are clarifying the legality of on-line entries by the 31st July of this year. On regulatory measures, there are new money laundering controls for betting by 31st March 2003 and revised guidelines for adult machine areas in family entertainment centres by the 31st March 2003. So where we have been able to take action without legislation, we have done that, but, as you know, Mr Wyatt, it is the authorities of the House which will determine whether we get a slot in the legislative timetable. We will make a bid for 2003/04 and we will just have to wait and see what the House authorities say.
(Mr Caborn) Well, we shall not be able to decide that. That is a decision which to a large extent will be taken by the marketplace. Obviously the new Gambling Commission which will come in has considerable powers, more than the Gaming Board have got, as outlined in the proposals. It will be (a) by that licensing and (b) by the planning permission which will have to be sought from the local authorities and then on to the private sector to invest, so it will not be a decision for the Government in that sense, but more a decision of the licensing authorities and the local authorities.
(Mr Caborn) Well, at the moment there is no hypothecation, as you know, Mr Wyatt, into taxation. There is the introduction which will by the Deputy Prime Minister on the business improvement which could well be, depending on how that actually goes out, there could well be advantages by the infrastructure which would be put in by public sector investment in those areas, but beyond that there will be no advantage, no tax advantage other than as, as I say, an improvement and there is no system in the Treasury in terms of hypothecation.
(Mr Caborn) I think Mr Bawden can give you the detail on that, but all I would say is that we expect local authorities who have them and the responsibilities which they will have as part of being financially tied to those, we believe that they should be fully recompensed and that that should come out of the licensing arrangements, but Mr Bawden will be able to give you the details of that.
(Mr Bawden) Thank you very much, Minister. I think one of the issues which has fallen out of this consideration over and above the policies is the very disparity and the inconsistent system of certain types of licences in terms of duration and the cost of those licences and the amount of regulatory effort which goes into enforcing licensing provisions. We were all quite surprised to see that some licences are as low as £32 for premises having machines. The intention set out in A Safe Bet is that we will for each area of gambling activity, including machine locations, assess the regulatory risk that attaches to a particular activity and then assess the amount of enforcement and administrative effort which will go into supporting a regulatory regime for that gambling activity and set fees accordingly. I think the inference of that is that in respect of some of the machine-type premises, there will need to be an increase in licence fee charges to reflect the fact that currently there is little or no regulatory inspection or enforcement activity taking place and again the (?) indicated that there is a gap in that situation for the present time and they were not responsible and with the local authorities, issuing permits for these premises at £32 a time, there were hardly local authority resources available to police them.
(Mr Caborn) I do not think it is acceptable in that sense, but if one is going to deny an activity to the vast majority of people in this country, and we could go through many parts of life, but I think if one draws an analogy down of the deregulation in licensing, then the same argument was put the other way, but what we want is to get social and corporate responsibility, as far as the industry is concerned, to make sure that we protect the public and we can start looking in, I think, a more serious way than has probably been the case before into what are the problems or what are the causes of problems in gambling.
(Mr Caborn) I do not think anybody deliberately goes out to increase it. As I say, there is a balance judgment that one has to make with these issues.
(Mr Caborn) I think that could well be the right approach to that. As I say, in many other walks of life, if you actually deregulated the use of alcohol, then you will actually probably increase the incidence of abuse of alcohol.
(Mr Caborn) I do not think it is socially irresponsible. I think what we are trying to do is to mitigate against the worst circumstances and that is in fact what we have legislated for both in terms of how we construct our responsibility and, more importantly, how we try to engage an industry which has not been engaged before in terms of providing facilities to, firstly, try and stop that source and, secondly, to mitigate that in terms of the circumstances.
(Mr Caborn) I do not accept that and Sir Alan Budd will defend his Report. What we have done is gone out and consulted on Budd extensively and had a dialogue with both the industry and organisations like Gamcare and based upon that we have reflected on it and we have now come up with our proposals, so just as Sir Alan Budd would defend his Report as a very good piece of work, I would defend our proposals as the Government.
(Mr Caborn) With all due respect, I think we are addressing that and I think if one looks at the situation we have now, then what we are proposing, considering the time particularly, in terms of amusement for prizes, the definition at the moment is drawn quite widely. We have actually redrawn the boundaries there and, as we have indicated, local authorities now in terms of the licensing of these will have the responsibility, along with other agencies like the police, like Customs & Excise, but chiefly local authorities in AWPs will have the responsibility for regulating that and inspection and we will provide the resources to do that because the industry and the licence fee will provide, so I think there are a number of areas which will actually tighten the situation to what it is today.
(Mr Caborn) It will be a decision of the local authority, along with the new Gambling Commission and we will obviously pitch the licence fee as one which will cover the cost and, as I said, I do think it is the corporate and social responsibility of the industry which is emerging and I think that is reflected in part by the fact that they responded to the Budd proposals for the trust and £1 million has been raised and we will be moving to make sure that that is an independent trust. I think that is the response by the industry and they know very clearly that if that does not happen, then we will take reserve powers and legislate for that.
(Mr Caborn) It is £32.
(Mr Caborn) Well, I think we have made a commitment in going into legislation that we accept that we will cover the costs of local authorities licensing and policing the machines in the establishments, as we have said. They still want some details out of us, therefore, I cannot give you the figures, but that will be part of the ongoing debate and further scrutiny from this Committee and we will come back and tell you what those figures are, and we have said very, very clearly what we said in the Report how we are going to deal with this.
(Mr Caborn) I would suggest that it is not just the policing of this and why the local authorities have been brought into play - it is because if you license premises, if you take a fish and chip shop for example, they have responsibilities for many other issues around fish and chip shops, health, hygiene and safety as well, and if they have got a gaming machine they would inspect that as well. There could well be a one-stop-shop approach by the local authorities to inspection and policing in many areas. It may not be as one would probably expect from your description.
(Mr Caborn) We will probably be looking at multi-skilled.
(Mr Caborn) We will see. I can assure you that we have taken a view and we are determined to carry that out. We will give powers to the Commission to do that. That Commission will be responsible to Parliament as well and will be scrutinised, like we are scrutinised.
(Mr Bawden) With all the organisations that responded to consultation obviously copies are in the House Libraries. Camelot obviously responded, and I think published their own response, as to the National Lottery Commission, as did a wide range of charitable voluntary organisations and the distribution bodies responsible for distributing National Lottery revenue to good causes. I think it is fair to say there are probably a number of other private correspondents who raised similar concerns about the potential impact of the Budd recommendation on the Lottery.
(Mr Caborn) That is what the societies' lotteries wanted us to bring in, and we thought that was reasonable. We looked at the impact that would have on the National Lottery and thought that was a fair balance.
(Mr Caborn) And the rollover, and we said, "Okay". Basically we have given the societies' lotteries pretty well everything that they asked for.
(Mr Bawden) I do not think we get the Lotteries Council on behalf of the societies' lotteries saying they would not want more. What we took was their own evidence to Sir Alan Budd's review in terms of what deregulation they were seeking, and they sought a doubling of the limits, which we have subsequently doubled.
(Mr Caborn) I think you are absolutely right, it is an area where there needs to be more work done on that and that indeed will reflect that. If you look at the international comparisons where ours is 3.6-3.8 per cent, in Australia it is 2.3 per cent, in the US it is 1.1 per cent, and Spain is 1.4 per cent. There the margins you are looking at seem to be reasonably consistent. I think you are absolutely right, it is something that we will be discussing with the Trust - how we could use the monies. I am very keen also to involve the Department of Health in this. I think there are implications for the Health Service which we need to take on board. Therefore, we plan to some extent to give the type of resources that we need to take and use to address this particular problem. I think this is an area that has been under-resourced in terms of research.
(Mr Caborn) In a word, yes.
(Mr Caborn) No.
(Mr Caborn) I do not know. I thought I had every possible question posed during the consultation but obviously that one has not been posed!
(Mr Caborn) Taxation is a way of providing the Service nationally and we would deal with it nationally.
(Mr Caborn) Yes.
(Mr Caborn) I do not think I was engaged with the Department of Health in that particular regard. What I was trying to do was get their expertise out of them to make sure they influenced what was happening in the Trust. In terms of the operation of the Health Service, then it is a universal Service. The problem with alcoholism is probably more important in Blackpool than problem gamblers.
(Mr Caborn) It is a universal Service and I think taxation probably deals with that effectively.
Chairman: A constituent of mine went on holiday from Manchester to Blackpool. During his time in Blackpool he booked a mystery coach tour. The mystery coach tour took him to Belview in the street next to where he lived in Manchester, so he had a cup of tea with his mother and went back to Blackpool! Minister, thank you very much indeed for your answers, particularly the monosyllabic ones!