UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1554-ii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Culture, Media and Sport Committee

Gambling

Tuesday 25 October 2011

Ian Burke, Alan Armstrong, Neil Goulden and John O'Reilly

John Greenway

Evidence heard in Public Questions 108 - 201

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Oral Evidence

Taken before the Culture, Media and Sport Committee

on Tuesday 25 October 2011

Members present:

Mr John Whittingdale (Chair)

Dr Thérèse Coffey

Damian Collins

Philip Davies

Mr Adrian Sanders

________________

Examination of Witnesses

Witnesses: Ian Burke, Chairman and Chief Executive, Rank Group, Alan Armstrong, Compliance and Development Director, Rank Group, Neil Goulden, Chairman Emeritus, Gala Coral Group, and Chairman, GREaT Foundation, and John O'Reilly, Managing Director, Coral Interactive, Gala Coral Group, gave evidence.

Chair: Good morning. This is a further session of the Committee’s inquiry into the implementation of the Gambling Act. I welcome Ian Burke and Alan Armstrong of the Rank Group, and Neil Goulden and John O’Reilly from the Gala Coral Group.

Q108 Dr Coffey: Mr Burke, Mr Goulden, in broad terms is the gambling industry as a whole in a better or worse position since the implementation of the 2005 Act?

Ian Burke: I think there are many positives in the 2005 Act but I think the original intentions of those who drafted it, namely to generate economic activity and put in place good consumer protections, have not been delivered. I can go into the reasons why I believe that to be the case but that would be my assessment.

Dr Coffey: Perhaps you could go into the reasons.

Ian Burke: I think there are a couple of main reasons. I think the first one is that the previous Government did not line up the tax policy with the social and economic policy. We were hit by a number of tax increases in the 2007 and 2009 budgets, which added to the tax burden in casinos, bingo and poker, and they more than offset any benefits those sectors achieved through the 2005 Act.

I think the second reason is even within the 2005 Act there are one or two significant flaws in the Act, in particular the thinking behind the 16 new casinos that are able to offer a broader range of products than the current 1968 Act casinos. In many cases also, they compete in those permitted areas where there is already a 1968 Act casino, which are now competing on an unlevel playing field.

Neil Goulden: From our perspective, there have been some good things and some bad things in it. A good thing is a single regulator covering the whole of the industry, and I know you will be taking evidence on that as well later by the regulator. But on the bad side, the area that has suffered most is retail. The gambling retail industry is still very tightly regulated. The regulation, which you may come on to, about casinos has come through a bit muddled. In our evidence we put forward that the total cost of regulation and taxation-including, therefore, the smoking ban-cost the Gala Coral Group £120 million a year, and that is on a company making £400 million a year, so it is a 30% reduction in the profitability. However, I hasten to add, the bulk of that was the smoking ban and taxation rather than the Gambling Act.

Q109 Dr Coffey: Given that Sir Alan Budd had a much more deregulatory vision, are there any key regulations that you would like to see changed in the Gambling Act?

Ian Burke: The most obvious one to me is to level up the 1968 and the 2005 Act casinos to allow the 1968 Act to compete effectively with the 2005 Act casinos, and to grant local authorities who wish a casino to be developed in their area the ability to do so, and to give the casino sector the opportunity to move licences from one current permitted area to another permitted area, should the local authority wish to see a casino investment within their designated area.

Neil Goulden: I would go back to what I have just said about retail. Retail is very tightly regulated. Retail is where you will develop economic growth and jobs rather than from online. You can sit at home online and maybe play a slots game for £1,000, £2,000 a spin, yet a casino in the UK that is tightly regulated, predominantly members only, does not have that ability. I do think the retail industry is tightly regulated and is a net loser in this.

Q110 Dr Coffey: Can I take it from what you have just said-I heard very clearly what you said-that you want almost any area to be a permitted area as long as the local council agrees with it? For you, Mr Goulden, I am not quite sure whether it is a case of regulate more tightly the online or liberate the offline-to £1,000 a spin or whatever.

Neil Goulden: No. I think it is much more a case of looking at a reasonable and socially responsible deregulation of the retail market because, if that is going on online, to some extent the regulation of the retail market is largely ineffective because you can go and do it online anyway.

Q111 Chair: Following on from that, your two companies are both major casino operators. The debates on the Gambling Act were dominated by discussion of casinos-hours-and yet the great new regime that was finally ushered in as a result of the Gambling Act has produced not a single new casino and one licence has been issued. Do you see any prospect of either of your companies wanting to invest in new casinos under the present regime?

Ian Burke: Yes. We do intend to invest, both under the 1968 Act and the 2005 Act. I think the 2005 Act casino licensing process has been dogged by a number of delays but there is some momentum behind that now with the first casino opening in Newham in a month or so. A number of others have been approved by the local authority and half a dozen others are in various stages of competitive tender. If there are going to be any changes, it is a timely opportunity to make some changes as regards the 1968 Act in order to bring them on to the same level playing field.

Neil Goulden: I think exactly the same. Gala Coral is bidding for a number of the licences, but we also believe that there should be a levelling up for the existing casino industry.

Q112 Chair: Yes. The position where you have two different regimes is clearly unsatisfactory. Are you inclined more to try and develop casinos under the old regime or under the new regime?

Neil Goulden: I think both, but you are exactly right in what you are saying: it is a bit like having two pubs in a town and telling one of them they can’t sell lager, because 10 of the 16 new licences are in existing permitted areas where there are existing casinos. It is kind of a two-tier system that we think is unfair, and we would like to see that evened up as soon as possible between the two Acts.

Q113 Chair: Is the key to this machine numbers?

Neil Goulden: I think the key is machine numbers. If you look at the anomaly in the Act that a large casino is allowed five machines for every table, 150 maximum, so it will put in 30 tables. A small casino is allowed two machines for every table, with a maximum of 80, so it will put in 40 tables. Therefore, a small casino will be bigger than a large casino. I know you are going to hear from John Greenway later, but it got a bit muddled towards the end, I think.

Q114 Chair: We heard from NCiF last week who took a similar view. They were suggesting to us that portability was one solution. Is that something you would favour? You could take a licence anywhere if you had a licence, essentially.

Ian Burke: Yes, we would do . We would not propose increasing the number of overall licences . There are around 180 currently in the UK , which were licensed under the 1968 Act , and about 140 of them are trading and a further 10 are in various stages of development . At Rank we are currently under construction in two 1968 Act licences . W e do feel there would be job creation and contribution to the Exchequer , as well as local communities , through the development of some of those remaining 30 dormant licences that are not currently planned to be developed under the 1968 Act.

Q115 Chair: The other thing we heard from NCiF last week was that the industry had essentially lost its appetite for a regional casino, that even if the law did now change and we got a sensible place for it to be built there was no real enthusiasm to go ahead. Do you think that is true?

Neil Goulden: I think people are a little scared to put their head above the parapet on that particular one because I think a few people carry the scars. But recently, with another hat on-I am a member of the Low Pay Commission-we paid a visit to Blackpool and every single person we met in Blackpool said, "Just think what a regional casino could have done here, the regeneration it could have done to Blackpool". So from a personal point of view, I think that a regional casino could well be a good thing but I don’t think anyone in the current industry is going to put their head above the parapet and push for it.

Ian Burke: I think there were many factors behind operators losing interest and no doubt tax was one of those factors. If you look at a game like poker, for instance, in the UK you can play poker online or you can play it in a number of land-based environments but there are seven different tax rates from 0% to 50%. I think a number of operators were just puzzled by the previous Government’s approach to gambling taxation. When you are making these significant long-term investments I think you need a fairly consistent policy on tax that is aligned with the social and economic policy. I think a number of operators lost confidence in that when they saw the various tax increases in 2007 and 2009.

Q116 Chair: But the concept, as it was advanced when we were looking at the Bill, was that this would be an entirely new leisure experience that included gambling but would have fine dining and shows and wellknown rock stars and all sorts of things in one great entertainment complex. That at the time was going to deliver a heap of benefits, but do you think that concept has now passed?

Neil Goulden: No, I don’t think it has passed. I think Ian is right in terms of tax being an issue but the politics of it are quite difficult. If you go to somewhere like Singapore where they recently allowed two brand new casinos, one on the mainland and one on Sentosa island, you see the huge regeneration and the positive effect of those casinos for the economy and jobs. I think there could still well be a place but I doubt that anyone is going to push too hard for it.

John O’Reilly: Not at 50% tax.

Neil Goulden: Not at 50% tax, no.

Q117 Dr Coffey: You have already talked about restrictive legislation and high taxation, but focusing on bingo, how significant is the issue? I understand you are highly reliant on gaming machines for revenue and profit and that the changes that were put in place had an adverse reaction.

Ian Burke: I think the bingo industry has had a tough five years. Rank is the only publicly quoted company operating in the bingo and casino sector so the impact of Government policies can be readily seen in our reported numbers. If you look at our bingo business, Mecca, we have had declining profits every year since 2006-the last year before not just the Act but also the smoking ban in England and Wales and then the tax hike affecting bingo in 2009. I think we have stabilised the business. We have put in nearly £100 million of capital expenditure. We are doing our best to try and modernise the business, and I believe the Committee might get a chance to see one of our new concepts in Dagenham next week. What we are asking Government to do is to support the industry through sensible deregulation without requiring any changes to primary legislation and also to put bingo taxation on the same footing as the start rates for all the other sectors within the gambling industry, which is at 15%. Bingo has a tax rate in the land-based environment of 20% currently and that has an adverse impact on the industry’s ability to invest.

Neil Goulden: From a Gala Bingo point of view, yes, we have also seen a threeto-fouryear decline in profitability, exactly the same as Ian reported from Mecca. Our profit is down from about £150 million a year to £60 million a year over that period and it has been quite devastated by the smoking ban and other forms of regulation. The one thing I would dispel is the idea that it is a dead product: there are still 2.5 million regular bingo players in the UK and they deserve our support.

Q118 Dr Coffey: Can you tell us more? To what extent are you reliant on not just the main game, as it were-I know there are varieties of that-but on the other gaming machines available in bingo halls?

Neil Goulden: In bingo it is a total mix. One of the reasons why bingo was more exposed to the smoking ban than other products was the fact that a lot of money was spent during the interval, and that is when people went outside for a cigarette because they could no longer smoke inside. But, yes, the tendency in bingo has been to give to those who want to come along to bingo a cheap, really good, main stage bingo, lots of bingo for an average price of a tenner, maybe a bit less, and let people come along and enjoy their games of bingo. If they want to spend then on food, beverage, interval games, machines, a discretionary spend, they are able to do so. The discretionary spend on the whole is more than the main bingo spend but not from all the customers. If you are on a tight budget you can still come along and have a game of bingo for £10.

Ian Burke: If I look at Mecca’s figures, our typical customer will spend about £16 per visit. About £10 of that spend is bingo, about £4 is on the various machines and then the rest is on food and drink.

Q119 Philip Davies: Ian, just to go back to a previous answer that you gave, you said that you did not believe that the number of casino licences should be increased. Can you just explain why?

Ian Burke: Essentially because the UK has a 40-year history of taking a view that there should be limits on the number of casino licences. Rank by instinct and I by instinct are free marketeers. I would rather let the market decide on all these issues. But I think there are policy considerations through the practice of time that have resulted in there being limits on the number of casinos in the UK and I am not unhappy with that because I think it has worked.

Q120 Philip Davies: It is not that you do not believe there should be an increase, but that you are not asking for an increase because you do not think it is politically acceptable?

Ian Burke: Yes.

Q121 Philip Davies: In terms of the competition you face from betting shops-you said you believed in the free market-do you believe in the free market when it comes to things like fixed odds betting terminals on the high street in betting shops? Are you a free marketeer as far as that goes too?

Ian Burke: Yes, I am. Across the land-based environment in the UK I think there is healthy competition. Customers have quite a bit of choice and we welcome that choice. We are investing in new land-based experiences, both in our casino business and our bingo business. I think there are some differences when you start looking in the online channels, particularly those unlicensed operators that sit outside either UK licensing or Alderney licensing, but broadly we welcome the competition from other forms of gambling in the UK, on the high street, through adult gaming centres or bookmakers.

Q122 Philip Davies: Fair enough. Neil, there has been a lot of controversy about clustering of betting shops since the demand test was dropped in the Gambling Act. I just wondered what your thoughts were on clustering of betting shops and the controversy around it.

Neil Goulden: I think at the end of the day it is about demand. Betting offices only get built where there is demand. Firstly, there is not proliferation because the number of betting offices is about the same. If clustering is perceived to be a problem one could reintroduce some kind of demand test but it would be a false demand test because it would be someone taking their view on what demand would be. What is happening out there is demand. Betting offices will only be built where there is demand.

Q123 Philip Davies: So there is a demand test? That is why bookmakers open-

John O’Reilly: There is, it is called customer demand. That is exactly what it is. I am not sure I quite understand the proliferation point, but to the extent that there is or has been over recent years, in some locales, a greater number of betting shops opening up, it is a function of the demand from customers around machines. That is what this is, it is about machines.

Q124 Chair: It is about people wanting to play on FOBTs and the limit-

John O’Reilly: It absolutely is. The arbitrary restriction of there being four machines per shop is indeed the point. In Haringey and Hackney, and there are other places that are mentioned, the actual number of betting shops has not grown over the period, but to the extent that in some locations there has been a growth in a particular high street, it is because bookmakers can see the demand for machine play is not being met. That is the reality.

Q125 Philip Davies: I will ask a question I asked of Ladbrokes and William Hills last week and see what your thoughts are. I put it to them that in a town, take Shipley for example, there would be a demand for 20 machines. That is what that town could sustain. Therefore, because there is a limit of four in each shop, you will get five betting shops in Shipley. If each shop was allowed seven, for example, there would be three betting shops. Is that a premise that you would accept, or would there still be five betting shops all with seven machines in them?

John O’Reilly: There might be four betting shops rather than three but, yes, in principle you are right. That is exactly what is happening, unfortunately.

Q126 Philip Davies: The clustering is all around machines and so if there was a proposal-

John O’Reilly: The arbitrary restriction on the number of machines is what is causing it.

Philip Davies: If the Government relaxed the rules you would have fewer betting shops clustered around each other?

John O’Reilly: No question. You would.

Q127 Philip Davies: Would you have fewer betting shops in total around the country or would they be more spread out?

John O’Reilly: I don’t know.

Q128 Philip Davies: Would it make other betting shops more viable to continue that otherwise are not viable at the moment?

John O’Reilly: I think in today’s economic climate there is a restriction on capital and therefore one puts capital in a place where you get a fast return. So, yes, that might lead to betting shops being more spread out, it might indeed.

Q129 Philip Davies: Neil, finally to you as somebody who has been involved with a business that does all forms of gambling, how has the issue of fixed odds betting terminals in betting shops affected the other parts of your industry-casinos and bingo? Has that had a negative impact on those other parts of your business or not?

Neil Goulden: That is an interesting one, because we purchased Coral in 2005 and FOBTs were in before that. When we were just Gala Bingo Gala Casinos we did a lot of analysis on the impact of FOBTs on our business. We found virtually no impact, certainly no impact on bingo. We found that there might be a little bit of impact on some of our casino players during the afternoon. Rather than go into a casino, go through all the membership, get in there and play a roulette table, they will say, "Oh, if I only have half an hour I can pop into the betting office". There was a little bit of an impact at the sides of it from competition but no impact on bingo.

Q130 Philip Davies: John and Neil, between you, if the Government did change the number of machines that they allowed in betting shops, should there be a limit? Should there be no limit at all or do you want a limit but just higher? What would you like to see?

John O’Reilly: I don’t know what the average is now, it is probably 3.85, and if the restriction is four currently there are about 3.85 machines per betting shop up and down the land. Some betting shops can only sustain two machines, some three. A lot of shops sustain four and some of those could sustain more than four and should have more than four, in my view. Now, there probably does need to be some level but four is not the right level. What is the level? I don’t know. I can understand the kind of policy issue that says, "We don’t want large roulette arcades on high streets." I can kind of understand that, but the level cannot be four. It has to be a higher number than four.

Q131 Philip Davies: What would you like? What do you think it should be?

John O’Reilly: Eight. Another arbitrary number, I am afraid.

Q132 Philip Davies: If it was increased to eight, if it was doubled, how many betting shops do you think would have eight? The majority?

John O’Reilly: No. A few hundred, I would have thought, would meet that level.

Q133 Philip Davies: A few hundred out of 8,500?

John O’Reilly: Yes. Typically, city centre locations, high traffic locations would meet that level, perhaps.

Q134 Philip Davies: Is eight the maximum that you would ever need? If the Government said there was no limit all of a sudden, would you still not put any more than eight because there would not be the demand for it, or would you end up with some shops that were basically surrounded with machines all the way round the side of the shop?

John O’Reilly: I think there is a natural limit on this. I don’t know what the number is, but I suspect it is high single figures. I can’t see a demand for large outlets that are simply offering B2 and B3 games. I can’t see the economic justification for that.

Q135 Mr Sanders: The Government have recently announced a review of stake and prize limits for gaming machines. What issues do you think it should focus on?

Ian Burke: We welcome the Minister’s statement on the reintroduction of a triennial review. It worked very well over a couple of decades across the industry. The Minister has indicated he is going to go out into consultation on this in the next month or two. For us it is an opportunity for DCMS to look at all the issues around stakes, prizes and numbers of machines across the different outlets we have been talking about.

Q136 Mr Sanders: Are triennial reviews frequent enough?

Ian Burke: I think so, yes.

Q137 Mr Sanders: Is that view shared?

Neil Goulden: No, we have a slightly different position to Ian. We welcome the triennial review-I would point out that it is six years rather than a triennial review for this particular review, and it is urgently needed-but we believe that there should be an annual review. Why wait? Things are moving, technology is moving; why wait three years? Have a simple review every year. It may be that in a year nothing happens, but just have an annual review based on recommendations from the Gambling Commission. They make recommendations, Ministers can look at them, and we can do that quite simply once a year.

John O’Reilly: Part of the triennial review, historically, was about the investment cost in coin mix and so on in machines, which is not relevant today. It should be more frequent.

Q138 Damian Collins: Do you think that online companies offering gambling products to UK citizens should face a regime of licensing, tax and regulation that is similar to the offline market?

John O’Reilly: Yes and no. I think the objective is laudable, but it presents some challenges in terms of how it is going to be achieved. The difficulty that is faced is that the sort of jurisprudence in the area from the European Court centres around liberalising markets that are currently closed, or not very open shall we say. I think that presents a challenge because effectively the UK market has been an open market. To regulate now those operators that are targeting the UK from offshore locations like Gibraltar, which is acknowledged in the Act, and Alderney and others that are on the white list, presents some legal issues. I suspect it is not going to be an easy ride to deliver a licensed and taxed regime for online in the UK.

That said, if it can be achieved through legal process and if it can be delivered with proper enforcement-that is, it is not just a tax on UK plc as we would describe it-then it has to be the right way forward. If it is delivered with a regime of tax that does not massively distinguish the online from the retail industry-and what we propose in our papers is a 10% flat rate of tax across all forms of gambling, online and offline-I think that is a regime that could work.

Q139 Damian Collins: Other comments from the panel?

Ian Burke: We broadly support the direction the Government are headed in, but we echo many of the comments John has made. We would like the Government to avoid the errors of the previous Government in terms of taking a piecemeal approach to gambling taxation. It is a real patchwork quilt of six different regimes currently. There is an opportunity to introduce a flat rate across all gambling products, regardless of channel, whether it is land-based or online. We think that is achievable, but I think the tax has to be lined up with the policy objectives in the social arena.

Q140 Damian Collins: If the licensing system was open, I would have thought that would get around some of the legal issues as long as the licensing system was not restrictive in terms of restricting access to the market, but you both highlighted tax. Do you think if the tax regime is right you would also see companies coming back onshore into the UK?

Ian Burke: I think it is a combination of the licensing regime, the tax regime and also the regulator being determined to use its enforcement powers to enforce the licensing objectives. We have seen the Gambling Commission do that in a number of situations now in land-based environments in the UK, closing down illegal poker clubs, for instance. They would have to follow that through with unlicensed online operators otherwise, as John said, it would be the public companies and the major companies who would be licensed and paying tax in the UK and they would still be at a competitive disadvantage against any unlicensed operators operating offshore online.

Q141 Damian Collins: Do you have any views about what you think would be an appropriate model for enforcement of a licensing regime?

Ian Burke: As other Governments grapple with this now, other jurisdictions are introducing some creative ways to enforce the licensing through tackling the payment processing, obviously restricting advertising-and locking the odd director up tends to focus the mind.

John O’Reilly: I think it is a challenge, though, because this is about locking the stable door in some instances and it is a difficult one to do. How you bring about a regulatory regime with strict enforcement when the UK has been an open market for so many years is difficult in Europe, I think.

Q142 Damian Collins: But do you think the offline market is leading customers to the online market because it has a lower cost base and is not regulated? Is that your concern, given the nature of your businesses?

John O’Reilly: I am not really sure what the ill is that the proposal is trying to fix. There is clearly a competitive issue online to offline, and Neil made some very valid points about the retail industry not seeing the fillip from the Gambling Act in 2005 that it maybe thought at one point it would see. The online industry has been free to develop from low-tax jurisdictions that are either identified in the Act, like Gibraltar, or recognised through the white listing process, and they have been able to flourish in the UK with regulatory regimes that are not different to that proposed by the Gambling Act. So it is difficult to now close that market without identifying clearly what the ill is that the current system has created. Actually, the ill that it has created is an unfair competition between online and retail.

Ian Burke: There is no doubt in my mind that online is a form of competition to land-based environments, and that is fine. If you look at bingo, bingo land-based is paying 20% tax and online is paying 0% tax. The tax does distort the way the market operates and the European Commission has recently indicated that different rates of tax applied to online versus land-based might even constitute illegal state aid. There are some significant issues around this from the tax point of view.

Neil Goulden: I was just going to pick up from what John was saying. It is very clear that online business is impacting retail business, and that was my point about why I think we need to look at the retail business because that is where the jobs and economic growth could come from. But we are no different to other industries. No one is standing here bleeding hearts about it; it is no different to other industries. The internet is here to stay. We just need balanced legislation that recognises the economic value of the retail industry in the UK.

Q143 Damian Collins: I want to ask a few questions about problem gambling. What types of gambling do you think present the greatest risk of problem gambling and why?

Neil Goulden: I will put on my other hat as Chairman of GREaT and talk about that. There is a paucity of research in the area of problem gambling and part of the reason for that is that academics do not agree even on the definition of a problem gambler. For example, there are probably two types of problem gamblers. There is the problem gambler that is obsessive, has a psychological problem and will bet on all forms of gambling. You are, therefore, dealing with the nature of the individual. They will often have drug problems, they will often have alcohol problems, they are predominantly smokers, and the person has a problem, because gambling in itself is not intrinsically addictive. On the other side you have excessive gamblers, and they sometimes get lumped together. An excessive gambler is someone who gambles a lot and probably gambles too much, a bit like a drinker who drinks too much for their own good but is not an alcoholic.

They are two separate things; one is about education and the other one is about treatment and psychology. It is very difficult at the moment with the paucity of research, and I know that the Minister in particular has been calling for more research in this area. We need to understand a lot more about what problem gambling is and how best to deal with it.

Q144 Damian Collins: Do you think certain types of gambling are more addictive than others?

Neil Goulden: No. There are two points I would make, one of which is that all of the research shows that there is no causal link between any particular product and problem or excessive gambling. The only absolute evidence is that if someone has a problem with their gambling they play on lots of different types of gambling products. They play it all: an addictive or an excessive gambler will go to all forms of gambling. One example you could use is that in 1999 the prevalence study showed 0.7% problem gambling, and in 2007 it showed 0.7% problem gambling. Between those years, 30,000 new machines, fixed odds betting terminals, came on to the market and had no impact on the levels of problem gambling. From a machine perspective, it shows that it is not necessarily causing problem gambling. So I do not think products cause problem gambling. They obviously can add to the potential of a person’s problem once they are an excessive gambler but there is no causal link between any particular product and a problem gambler.

Q145 Damian Collins: John, did you want to come in?

John O’Reilly: No, I agree. I think that is exactly right. All the evidence appears to be that those customers that gamble across a whole array of betting and gaming services are the ones most likely to have a problem.

Q146 Damian Collins: I want to bring up fixed odds betting terminals. This clearly is something you see as an important growth area of the industry. I was interested when we had our session last week, and again from comments today, that it is what underpins the commercial viability of a casino as well. Lots of other things go on in a casino, but whether you own a casino or not, it seems to be based on how many machines you have in a casino and other things seem to hang from that. Should this be an area of concern for us? I would imagine this is the type of gambling where you can bet a lot of money and lose a lot of money very quickly and all through the day.

John O’Reilly: I don’t think so and here is the reason why. As you will remember, fixed odds betting terminals, or whatever they were called in those days, were challenged and the solution became the industry coming up with its own code of conduct, which included a restriction of four. We caused our own problem, in truth. The stark reality is it does not matter how closely you put the machines together, you can’t play two at the same time. I don’t think the number of machines has any real bearing on it. Clearly, if somebody has a problem with gambling, they will be attracted to machines, as they will to any other gambling product, in the same way as they will be attracted to racing at Chepstow this afternoon. That is the way the industry works.

Q147 Damian Collins: If there is a proliferation of machines in a town-Philip Davies talked about clustering-do you think it becomes harder to monitor customer behaviour? If customers can move between several betting shops in the high street that all offer the machines, is it that much harder for staff in those betting shops to determine how much that customer is spending?

John O’Reilly: I don’t think so. If a customer is playing on a machine, they will play on a machine. There is a thing about lucky machines and they will go to another outlet to play a machine in another location that they deem to be luckier for them today; that does happen. I don’t think the number of machines in a high street has any real bearing on the level of problem gambling in that location. No evidence of that.

Q148 Damian Collins: Do you think more needs to be done in monitoring underage gambling on the high street?

John O’Reilly: Yes. I worked in a betting shop when I was 16- I lied about my age. It is difficult, in truth, but no excuses. We as an industry got a bit of a wake-up call, and there is much greater rigour now to management of underage gambling on the high street than was the case previously.

Q149 Damian Collins: I am interested in the way in which the industry promotes responsible gaming, if you like. If you compare it, say, to the drinks industry and the work of the Portman Group or Drinkaware, there you find much more proactive marketing of the issues. There are television adverts about responsible drinking and there is a code of practice that affects marketing as well as licensing. Do you think there should be more proactive education through marketing and communications and more resource behind it from the industry, similar to the drinks industry?

Neil Goulden: Yes, is the simple answer to that. I am speaking now as chairman of GREaT. The focus of GREaT so far, and the distributor, has been on treatment provision and research rather than into the area of education. I have recently met with Drinkaware. The GREaT budget in total is £5 million. Drinkaware spends £5 million on education programmes. "Don’t Spoil It", I think, is their current campaign, meaning have a great night out but don’t spoil it. It looks like it is fairly effective. I am very impressed with some of the work that Drinkaware is doing. We have gambleaware.co.uk as a website. We need to get more voluntary donations in to uplift our budget from the £5 million, which is predominantly going towards treatment and research. I would like to see, in the long term, us spending more money on education and I think that is a very important way forward for the industry.

Q150 Damian Collins: If there was, if you like, a licensing regime or a broader sort of white list of online companies, do you think there should more obligation for them to put money into a UK fund for promoting responsible gambling as a condition of operating in the UK?

Neil Goulden: I think we should be encouraging everyone to make contributions. GREaT has 900 donors; there are 2,800 licensed operators in the UK. Forget those that are not licensed in the UK-there are 1,900 licensed operators in the UK who do not contribute towards GREaT’s activities. If we could get them to contribute even at a minimum level we would have £10 million and we could spend £5 million on education as well as all of the treatment and other provisions. I think the key is working with our new trustees-Ian, indeed, is a trustee of GREaT-but working together we can get the whole industry to contribute, not because we threaten them with a statutory levy but because they believe that is the right thing to do.

Q151 Damian Collins: Do you think that the decisions on how money is spent to promote responsible gambling, to deal with problems of addictive behaviour towards gambling-the decisions on support and the type of marketing-should be made by a body that is more independent or completely separate from the industry?

Neil Goulden: No, I do not. You are talking about the old tripartite system. Since I took over at GREaT we found that the old system was unwieldy, bureaucratic and costly, particularly for a £5 million budget, and it was diverting money from front-line services. When you are spending only £5 million what you need is an approach that is streamlined, integrated and based on partnership working. When you have a distributor that after two and a half years had not signed a helpline contract and was involved in a costly mediation process with GamCare, and questions were being asked in the House of Commons, you begin to think maybe the system is not working too well.

We have no divergence of interest with anyone else in terms of treatment and education. We want to make sure that people do not have a problem with their gambling, and if they do that they receive speedy and effective treatment, support and help, therefore reducing the number of problem gamblers in Britain. Absolutely no divergence there. The Minister has stated to me quite clearly that the industry must own this problem and the industry must sort out a better working arrangement for the voluntary and we are determined to do that.

The last thing, though, is about research. I do agree that the research should be independent of industry, independent of Government. I have given a commitment to the Minister that we will put in place procedures to make sure that the research that is done is proper, independent and not in any way directed by the industry. I think that is right; we should not be directing the research.

Q152 Damian Collins: How many problem gamblers do you think there are in the UK?

Neil Goulden: It depends which screening you look at and whether you believe either of the screenings are accurate but, give or take 100,000, 400,000. That compares to 16 million clinically obese, 11 million smokers, 6 million with an alcohol problem, 5 million who use illegal narcotics. It is about 400,000 problem gamblers.

Q153 Damian Collins: How do you arrive at that number?

Neil Goulden: How do you arrive at the number of 400,000? I don’t.

Damian Collins: How does one arrive at that number?

Neil Goulden: There is a screening process that asks nine particular questions and if you score yes to more than three you are defined as a problem gambler. I think at three and four you are an at-risk gambler or a low-level problem gambler, and if you get all nine you have a bit of a problem.

Q154 Damian Collins: How is the screening process undertaken?

Neil Goulden: Just questions on the street and they do a select sample of people, go through that and by that you arrive at a statistically-hopefully statistically-sound estimate of the number of problem gamblers. It is only an estimate based on research.

Q155 Damian Collins: It is just face-to-face interviews in the street?

Neil Goulden: Yes.

Q156 Damian Collins: A lot of research companies don’t do that any more because they think people largely answer not truthfully but they give the answer they think they should give. Is that something you have analysed at all?

Neil Goulden: I think that is a very good point you raise. We don’t do the research, by the way. The Gambling Commission do the prevalence study. I think that is right because last time they did the research one of the problems they struggled with was that the "no response" rate was huge and that can bias the findings of a piece of research. As soon as we said, "We want to talk to you about gambling", people did not want to talk to the researcher. You start off with 35% of people saying, "I am not going to answer your questions". Those 35% who would not answer the question, which way were they going to go? I think it is a very difficult research area and I know the Gambling Commission are looking at maybe on-the-bus surveys, tagging it on the end of other things, different ways in which you can get towards a number.

Q157 Damian Collins: People do different sorts of tests on the high street but it tends to be marketing testing by showing someone something, but no opinion research company conducts research based on face-to-face interviews any more. I would not be certain how much confidence to have in that number of 400,000; it might be quite a bit higher.

Ian Burke: Can I look at it another way. In our casino business last year we had about 1.1 million customer visits-different customers-and we had about 2,000 who got to the point where they wanted to exclude themselves because they felt they had a problem with their gambling. In our bingo business, again we had about 1 million customers a year and we had about 150 people who excluded themselves because they felt they had a problem with their gambling.

Q158 Damian Collins: Yes, but that would be a bit like saying we should monitor problem drinking by the number of people that have signed up for Alcoholics Anonymous.

Ian Burke: Not necessarily. We know 99% of our customers do not have a problem with their gambling, enjoy it responsibly and see it as a good afternoon or a night out. As an operator, our policies are there to, firstly, prevent problem gambling, then recognise it when we see it through behavioural changes-we train all our customer-facing staff to spot those sorts of behavioural changes-and then intervene in terms of conversations between the general manager and the customer. The consequence of that leads to those sorts of numbers of customers excluding themselves.

Alan Armstrong: Those exclusions came about because of the conversation we had with the customer. We recognised that there may be some behavioural problems with the customer. We went through a series of interviews with the customer and we came to a joint position where in the best interests of the customer they should refrain from gambling in our units for perhaps six months.

Neil Goulden: Going back to what I said earlier, 400,000 is as good an estimate as one could get at the moment. One has to be careful about this definition of addictive, obsessive, problem gamblers who need psychological treatment, which is much less than 400,000, and what I would call excessive gamblers. There needs to be more work. A lot of work has been done in Canada on that, trying to say there are two segments of problem gamblers. There are the psychologically addicted gamblers and there are people who are just gambling too much.

Q159 Damian Collins: What percentage is that 400,000 of the overall regular gambling population of the UK? How many people are regularly using betting shops, playing bingo, going to casinos? Do you have a sense of what the customer base is for the UK?

Neil Goulden: 75% of the adult population gamble.

Q160 Damian Collins: Does that include people who have a flutter on the Grand National every year?

Neil Goulden: Yes, it does and it would include people who play the lottery as well.

Q161 Damian Collins: If we take those people out and look at people who are more habitual visitors to betting shops, play bingo every week or once a month, can we get an idea of what that regular market is?

Neil Goulden: There was a piece of research the Committee might like to get their hands on, done by Ernst & Young, called A Winning Hand, and they did some research in that area. Broadly speaking, they said 25% of the population gamble regularly and on more than one thing, 50% of the population gamble occasionally-Grand National flutter, just the National Lottery-and 25% of the population do not gamble.

Q162 Philip Davies: Can I ask you about the Gambling Commission and how effective you think it is as a regulator?

Alan Armstrong: Can I take that one? I would say two things. The reason gambling companies have had the reputation in this country for excellence in how they conduct their business has been historically due to both the efforts of the Gaming Board for nearly 40 years and the subsequent efforts of the Gambling Commission. We would pay tribute to both those regulators in maintaining high standards of regulation and the companies stepping up to the plate and their responsibilities. In terms of effectiveness, if you were to go around the world and ask colleagues who work across jurisdictions, both the Gaming Board and the current Gambling Commission have a very high reputation.

Q163 Philip Davies: One thing that some people in the gambling industry tell me is that they feel that the Gambling Commission does not know enough about gambling. What would you say about that?

Alan Armstrong: I think it is the industry’s job to ensure that the issues around operations are fully aired with the Gambling Commission at regular intervals, and we do that.

Q164 Philip Davies: Do you agree or disagree with the premise I gave you?

Alan Armstrong: I think they have sufficient knowledge within their estate, within their population of experienced investigators, to know sufficient about the industry to regulate it.

Neil Goulden: I think it is a bit unfair.

Q165 Philip Davies: A bit unfair or totally unfair?

Neil Goulden: No, it is unfair.

Q166 Philip Davies: What about the cost of the Gambling Commission? One of the other complaints I hear from people in the gambling industry is that it is too expensive. What do you make of that?

Alan Armstrong: Can I just make two quick points on that. I think the Gambling Commission were asked to take a much wider brief than the Gaming Board. The number of units that they had responsibility for went to something like 12,000; the Gaming Board had responsibility for about 900 licensed units. I think the cost base of the Gambling Commission went up significantly to bring the Act into force, so there was a period of time between 2007 and 2009 where extra resources were acquired to bed the Act in.

I think the current run rate in terms of staffing is about 200 at the Gambling Commission and I think the budget is around £12 million to £13 million. In relative terms, the Gaming Board in its last few years was around £4 million and it had a staff about 85, so pro rata it is there or thereabouts.

Neil Goulden: I think I can add to that. I think it was in this room I gave a talk to the all-party betting and gaming group where I analysed that if you go back to the 1968 Act the Gaming Board’s cost as a percentage of gross gaming yield of what it was regulating compared to the new Gambling Commission is almost exactly the same, and therefore I think broadly that the cost is about right.

I personally would like to see the Gambling Commission evolve. I would like to see them become a bit more risk-based and I would like to see them deal more with illegal operations. Why did they visit 240 Coral betting offices last year-they are all the same and all the controls are at the centre anyway? Become more risk-based, look at the illegal operators, look at where the real problems are. A modern regulator, I believe, should promote the economic health of the industry that they regulate and I don’t think our regulator does that. I would like to see them evolve, and I think they will.

Q167 Philip Davies: I might come on to that in a second, but in terms of the cost again, even if you think the overall cost is reasonable would you accept, as somebody from a large betting shop chain, that the costs to small bookmakers compared to large bookmakers are excessive?

Neil Goulden: I don’t think I would use those exact words, but I know they are going through a fees consultation at the moment. Our position is quite simple. We welcome the help the Gambling Commission want to give to small businesses, and I do use the word small businesses rather than independent bookmakers because it is about small businesses. I do think the help they can give to small businesses is welcome and the correct thing to do. I would just like to see them become more efficient and not put the extra cost on us.

Q168 Philip Davies: If you think the overall budget is about right and if it charges smaller operators less, then presumably by definition it has to charge bigger operators more.

Neil Goulden: Or become more efficient.

Q169 Philip Davies: Or become more efficient. You think that maybe they are too costly overall?

Neil Goulden: I think they could become more efficient.

Q170 Philip Davies: Is there any reason why they should not charge a flat fee per shop for everybody and then that would be the same for big chains and small chains? What is the reason why they should not charge the same fee per shop?

Neil Goulden: Risk. A risk base. If you take a big company it will have compliance teams and a lot of central controls and systems that the Gambling Commission could come in and audit, because not a lot happens at the shop level. So I do not believe, certainly for betting offices, that a flat fee is appropriate.

Q171 Philip Davies: You were saying earlier that there are many betting operators who do not contribute to the GREaT Foundation, but might it be the case that because their cost base of all the other things, like the Gambling Commission, is so much higher, it is very difficult for them to have anything left at the end of the day to give to the GREaT Foundation? If the charges were more equitable to smaller businesses as they are to bigger businesses, they might have a bit more money at the end of the year to give to the GREaT Foundation.

Neil Goulden: Firstly, as I said before, I am all in favour of help for smaller businesses and I think that is right. In terms of GREaT, we are asking £250 per betting office. It is not a huge amount.

Q172 Philip Davies: In terms of the Gambling Commission promoting the gambling industry, you seem to be indicating that you thought it could do more to promote the industry as a whole. Is it possible to promote an industry and regulate it at the same time? Are those two things compatible or does it come with a conflict of interest?

Neil Goulden: No, I don’t believe it comes with a conflict of interest because good regulation requires the economic health of an industry and, as the Budd report said, regulation in this country should be a balance between legitimate business interest and social protection. I am not saying they should be a flag waver for the industry-they should not be a supporter for specific things in the industry. The words I used, quite specifically, were they should promote the economic health of the industry.

Q173 Philip Davies: What would you specifically like them to do that they are not doing?

Neil Goulden: The main thing is to help with the de-politicisation, if you like, of gambling. I would like to see them make recommendations to Ministers on an annual basis of, "We should tighten here. We should deregulate there". They should be making those sorts of regulatory recommendations perhaps on an annual basis. That is one thing I would like to see them do.

Q174 Philip Davies: Finally, Neil, particularly to you because Gala Coral cover all the different types of gambling, in terms of promoting the industry, would it be fair to say that the industry has not helped itself in the past by bickering among different parts of the gambling industry rather than working together to promote each other?

Neil Goulden: Yes, I think that is a very fair comment and I think part of the reason why the industry has become so sectorial is because the regulation is sectorial and therefore we have different parts of the industry looking at their regulation against what other people are getting in their regulation, so it drives a silo approach. I know I speak for the people around this table, because Ian and I have talked about it and John and I have talked about it in the past: the gambling industry does need to come together. It needs to be positive about gambling, it needs to be socially responsible and it needs to up its game, so I agree with you totally.

Q175 Chair: I think there is a general view that all those who lived through the experience of the debates on the Gambling Bill still bear considerable scars. The appetite for doing anything in the arena of gambling on the part of Government is pretty limited. Do you detect that you get enough support from Government? Are Government committed to a thriving gambling industry?

Ian Burke: I think the DCMS has been supportive and I think the Minister has made a number of positive announcements in recent months, which have helped bingo with the additional B3 machines. I think there is a lot more scope. If you on this Committee are able to recommend to Government that they line up their thinking on tax with the social and economic policies and also take a step-by-step approach to sensible deregulation that does not require primary legislation, such as granting the 1968 Act casinos parity with the 2005 Act casinos, and portability of licences, Government could play their part in helping us continue to be a modern leisure business that is investing, generating jobs and making a good contribution to the Exchequer.

John O'Reilly: I have been at this game a long time and the 1990s was a period when we successfully pushed through a lot of changes in regulation right across the industry without any great profile or media coverage. Then Budd was met with huge approval by the industry. Then we went through the regulatory process. I agree with the comment that the industry did not help itself during that period particularly. The whole process achieved lots of media headlines and the enabling Act, as it was called at the time, became anything but. The industry is now pretty much stuck in a quagmire and it needs regulatory change to move on. The problem is it needs the help of Government to achieve that.

Neil Goulden: The gambling industry in the UK can add economic growth, and jobs, which are very important at this point in time. We can do it without financial aid from Government. All we really ask for is to be treated as a socially responsible industry and not a social problem, and then we can play our part in economic recovery.

Q176 Philip Davies: Can I ask one final question? John and Adrian will know that over the last five or six years on this Committee we have covered lots of different areas for inquiries and everybody seems to come along with the same argument, which was, "DCMS, they are all very nice and very helpful. No clout, absolutely no clout at all". Is that something that you feel too?

Ian Burke: I didn’t say that and I don’t feel that, no.

Q177 Philip Davies: No, I didn’t say you said that. This is what previous people have said to us when they have come to previous inquiries about all sorts of different issues.

Ian Burke: No. In the 18 months the Minister has been in his new role we have seen him increasingly get a grip of the issues and he has been very supportive of our sector.

Neil Goulden: I have worked closely with five Ministers working in the gambling area, and indeed Opposition spokespeople. Once they had got to grips with their brief, I found them all to be supportive and to punch, so I agree with Ian.

Q178 Philip Davies: Are you happy that DCMS is responsible for the gambling industry rather than, say, BIS?

Ian Burke: Yes. Definitely.

Chair: Thank you very much.

Examination of Witness

Witness: John Greenway, Former Chairman of the Joint Committee on the Draft Gambling Bill, gave evidence.

Q179 Chair: Can I welcome to the second part of this morning’s session John Greenway, who is the former Member of Parliament for Ryedale and chaired the Joint Committee on the Draft Gambling Bill. You are also the Life President of the GREaT Foundation.

John Greenway: This is true.

Q180 Dr Coffey: Mr Greenway, in the first report that was published by the Joint Committee on the Draft Gambling Bill you suggest that if legislation were delayed you would anticipate there would be a sharp increase in gambling of doubtful legality. Was that the pressing reason why there was a need for new gambling legislation that led to the 2005 Act?

John Greenway: No, I don’t think so. I think that the pressing reason for the Act was a sense, which was captured in the Budd report, that the industry was working under some pretty arcane and archaic legislative and regulatory environments and the Budd vision was to deregulate the industry, bring it into mainstream leisure-I seem to remember that kind of comment coming from Ministers at the time-and that a great deal of work had been done by Government and by the industry. Some of the people you have just been interviewing had a role in that, and we had reached a point where it really was time to try and bring the regulatory process up to date and to make it future-proof.

The point about the illegality is that, for example, if you studied the report, I seem to remember that we had concerns about customer lotteries in local high street shops and there were concerns about prize competitions, all of which competed with the National Lottery. They were not properly regulated and the Act made a change there. But perhaps the biggest issue, unresolved in my judgment, about the dubious or more doubtful aspect of gambling, is the growth of online gambling. No one had any clue as to how far this would go and the sense that the online sector should be regulated. I share some of the comments that were made earlier, and you might want to ask me about them. I think the pressing point about the Act, and, John, you and I used to share a small suite of offices in Portcullis House and we remember the day of the wash-up. My Committee had recommended there should be an open market on large casinos-one per region, so there might be seven, and we ended up, in the legislative process, getting down to four. On the day of the wash-up we got it down to one and I think people were just getting really fed up about, "How long has this gone on?" We had a shadow gambling commission virtually running the Gaming Board; we just had to grasp the nettle and do it. But that was a very small factor I would say.

Q181 Dr Coffey: Clearly there were changes in Government intentions with regard to the industry change between First Reading and the final passage, as you were mentioning regarding the wash-up. A large proportion of debates on the Bill focused on casinos, whether it was the new licence conditions, the regional, the super. Did the rest of the gambling industry suffer because of lack of scrutiny of the Bill?

John Greenway: Absolutely not, I think the Bill was hugely scrutinised. It may sound like a sweeping statement, but apart from those in Government and the shadow team who took the time to study the report, which had 139 recommendations-and they were all unanimous in the Joint Committee of both Houses across parties, in a contentious issue like gambling. We were very thorough in what we did, but large sections of the media, and then as a consequence a lot of my former colleagues in the House of Commons, did not study any of that. It was almost as though the Bill had arrived at Second Reading having had no scrutiny at all. The idea of pre-legislative scrutiny was still pretty new at that time and I think it was a wholly helpful process. Not all the recommendations were not carried through-many of them were; issues related to the Gambling Commission, role of local authorities and the issue of social responsibility, which we might come on to.

I think the brouhaha that occurred-this question is probably as good a point as any on which to give the answer-is that certain sections of the media came to the conclusion that the concept of a casino in every high street was a stick with which they could hit the Prime Minister and the then Secretary of State for Culture Media and Sport-certainly in her case, wholly unreasonably in my judgment. This whipped up local opposition in constituencies. People wondered what on earth was going on. That was not the proposal but that is what people perceived to be the proposal, so we are where we are.

Q182 Dr Coffey: Do you think it was external pressure that encouraged the Committee to perhaps recommend more cautious change to the gambling industry than that proposed by Sir Alan Budd?

John Greenway: I think there is a very short answer-yes. The political game that was then played in relation to the Bill-Chairman, you will remember the thoughts about dealing with this legislation in the last year of a five-year Parliament, "All pretty un-contentious. There has been a pre-legislative scrutiny committee. This is the sort of thing you can do. Not mainstream for what was in the Government’s manifesto. Let’s get it over with". Actually, because of the political pressures and misconceptions about it, it became, I think, probably the worst thing you could do, because everybody was conscious of the fact there was an election looming and people reacted to what they read in newspapers. So I think, yes, it was the political pressure that ended up with the result that we did.

Q183 Dr Coffey: Earlier, Mr Greenway, in your response you talked about future-proofing. There is the feeling that the Gambling Act 2005 was not future-proofed to enable a flexible response to the economic, social and technological change. Is that a fair criticism?

John Greenway: Yes, I think it is. If you analyse all of the differing objectives that lay behind the Bill, certainly there was the concept of having a regulatory framework to deal with future technological change, not just within country but crossing the international stage, and the previous Government deserve credit for trying to get other jurisdictions on side and on board to take an international view and to co-operate. Unfortunately it did not happen, but what we were left with, and some of the questions that were asked earlier of the previous witnesses about the unfair competition from internet sites that are not located in the United Kingdom, all of that remains. In that respect I think it was a failure.

Q184 Dr Coffey: I think some of my colleagues are going to comment specifically about online and offshore gambling. You just mentioned international comparisons. I understand you took evidence from Australia and some others. Which other regimes around the world would you see as being most similar to that of the UK, or most directional for us?

John Greenway: Well, it depends which gambling sector you are looking at. You mentioned Australia. I went to Australia-it is the only time I have been there-with another member of the committee, Baroness Golding, and we came away with a very clear message, which is that if machines, high stake and prize machines, are a cause of problem gambling at all, the real problem is if they are easily accessible on the corner of the high street on the way home from work. However, if you build a huge casino like the Crown casino in Melbourne, which we visited, and you are talking about destination gambling within a major leisure product, all the evidence seemed to show that there was less of a problem. The so-called "pokie machines", which are on the street corner in every suburb of Australia, and which fund the sports clubs, are still a major problem for Australia, as far as I am aware.

If, however, you are looking at other sectors then certainly the Alderney Gambling Control Commission, which regulates a lot of online operators that face into the UK, and the online regulatory framework that has been introduced for those companies that are licensed here, all of that has been extremely effective, but in the online sector the problem has been that in other countries they have taken a wholly different view. Somebody mentioned earlier that people end up going to prison in certain places. America has turned their face completely against it because they suddenly realised there might be some competitive advantage in stopping all these other people coming into the USA. The European Commission, I know, has tried manfully to see if there could be some common view on how you would regulate online gambling across the whole EU, but of course in other jurisdictions they have gambling monopolies that they wish to protect-France being a good example-so this has not occurred. I would have said that what is now needed is a fresh look at how we regulate the online gambling activity that comes into the UK with the chance of creating some kind of level playing field in terms of taxation, contributions to horse racing, greyhounds, contributions to the GREaT Foundation-and I was the previous Chairman for three years.

Q185 Dr Coffey: Some of my colleagues are going to go into online gambling in more detail. Can I just take you on to taxation. Your Committee was clear on the need for the regulatory regime proposed in the Bill to sit alongside every taxation regime, and earlier evidence was given that it seemed to be out of line in the end. Is the gambling industry right to criticise the Government for failing to deliver that?

John Greenway: Totally. There was a complete disconnect across several Departments. There was a complete disconnect between the objective of regeneration through regional casinos-and we might want to talk about Blackpool because I have very strong views about it-that clearly required there to be some sensible taxation regime to encourage the kind of investment, whether it was inward investment from American operators or investment by some of the major UK operators, and the Treasury suddenly coming along saying, "We need the money", smack, "Here’s a 50% tax rate" and other tax increases, which made many of the business plans that had been put together completely and utterly unworkable. So the Americans effectively, as far as I can see, have all gone away and the vision of what you could have done in a place like Blackpool is just left in tatters.

Q186 Dr Coffey: So your assertion, strongly it seems, would be that Government taxation policy has hindered the development of the gambling industry?

John Greenway: I don’t think there is any doubt about it. It is hindering the industry now. You talked earlier about bingo. How we get ourselves into a position where the husband goes in the betting shop and pays one level of tax and the housewife goes in the bingo club and pays virtually twice as much is beyond me. There has to be a solution.

Q187 Dr Coffey: Or vice versa, of course.

John Greenway: Or vice versa, yes. I am not being in any way sexist. It does not make any difference. It could be the other way around. I know plenty of women who bet a lot on horse racing in betting shops.

Q188 Mr Sanders: John, does it matter if most online UK customers are using online companies based offshore, and if so why?

John Greenway: I think it matters for three reasons. First, it is important that the same regulatory standards apply to all of gambling. This has been achieved in part through the white list. Secondly, it matters because those companies that have chosen to site their operations and remain here in the UK are suffering an unfair taxation advantage. There is equally a taxation disadvantage to high street premises gambling, which you have heard about. I personally think that it ought to be an objective of the Government to try and resolve that. Thirdly, it matters because-I declare an interest, I was chairman of the all-party racing and bloodstock committee for many years-the contribution from the UK gambling industry into horse racing through the levy has been going down, partly because much of the gambling is not making the same contribution through the levy system. The first two reasons are obviously the more important.

Q189 Mr Sanders: Why did the Gambling Act 2005 fail to create a significant UK-based online industry?

John Greenway: I can only say because the offshore opportunity, less tax, fewer contributions, not contributing to GREaT Foundation as it is now, or IGT then, was an incentive for them not to be here and that is the problem. I think the objective was wholly laudable. I seem to remember Tessa Jowell and Richard Caborn running a seminar in Ascot and bringing overseas Governments along and they all signed up to the general protocol of what would be desirable, but their own national Governments took a different view. I think that is probably the issue. Looking back is all very interesting but if I were in your position, all of you, I would be wanting to try and find a way where you can try to solve some of this, without-I think it was Ian Burke who said this at the end of the session-resorting to primary legislation, because I don’t think there is any chance of that whatsoever. You do have an opportunity. I can’t see why we could not be taking a tougher line on some of the offshore sites on the three key points I have made.

Q190 Damian Collins: I want to go back to casinos and the industry generally, and then I want to talk about regeneration and the regional casinos. Do you feel that the casino industry has moved forward at all since the passing of the Gambling Act?

John Greenway: No. In truth we have ended up with a worse position than we had before we started. I remember, probably sitting in this Committee Room or the one next door, back in the late 1980s when I was on the Home Affairs Committee and we looked at gambling issues. The casino problem always was the 48-hour rule, you had to be a member and so on, things you could do, couldn’t do, how many machines. It was literally archaic, the kind of regulation, and the sense of trying to bring the casino into the 21st century leisure industry was the real attraction of Budd.

I suppose this is as good a point as any to make the statement, but I have made this comment publicly before: if Budd had been implemented, you would have seen a revolution in the UK gambling scene, and of course it was the prospect of that that caused the fragmentation and different elements within the industry arguing with each other as to what the problem would be. Quite frankly, if you take a city like York, where part of my constituency was, you have a premier league racecourse, probably as good a racecourse as any in the world. You can go on race day, sit in a bar and watch it all on screen, sit in a restaurant watch it all on screen, never go out and watch a live race at all and gamble your shirt away and nobody would know, absolutely not, because that is what you can do, but on non-race days you can’t do it at all. So if you were to have established a casino in such a facility, which would not strike me as being beyond the general vision of bringing the leisure industry up-to-date, what would the consequence be? Would you rather stand in a scruffy betting shop where you can’t even get a seat, can’t get a cup of coffee, watching the 3.00pm race, or would you rather go to the casino where you could sit in comfort and watch it all on the screen? Equally if you wanted to go and play machines, would you rather have machines in the high street where even little kids can try to wander in and no one spots them, or would you say, "Well, no, it’s much better you have them in a destination facility" and people can, in some sense, have greater control over them and what they do. In other words, a number of existing outlets would have closed if that had happened.

There was not, and I don’t ever think there was, the prospect of a huge growth in the amount of gambling. The figures all show you it is pretty constant. There is displacement to a degree but it is pretty constant. What you would have seen is a change in how the industry faces to the general public. That has gone now, completely gone, because the vision was not accepted and you are left with, as your previous witnesses said, an industry that is fragmented by nomenclature. Is it a betting shop? Is it a High Street arcade? Is it a bingo club? Is it a casino? Actually what people want to do is go and bet on a horse, go and play bingo or go and play on machines, or a mixture of all three; they may want to go and have a drink. They are having to fit that experience into the kind of straitjacket of where these outlets are. That is what I think the tragedy is of what happened with the 2005 Act.

Q191 Damian Collins: The casino representatives have said in our previous session today and in the one we had last week that they would like a common standard for the ratio between gaming tables and machines in small and large casinos, with the ratio of one table to five machines. If that existed in small casinos, what do you think the impact would be?

John Greenway: I think it might make some of the smaller casinos that are struggling-neither of your previous witnesses, Ian Burke and Neil Goulden, referred to the fact that some of their estate has shut-probably a bit more viable. I can’t see the logic myself in all of the differentiations.

Incidentally, I seem to remember, I think it is in here, that we recommended on the small casino a 3:1 ratio, not the 2:1 that we ended up with. I am sure that is true. The problem you have at the moment is you have these two different legislative regimes. I can’t see any huge appetite at the moment for an increase in the number of casinos that we have. I would have thought the solution would be through SI-which I think, Chairman, would be an affirmative procedure-to allow portability of licences, to change the ratio of machines, to bring the two lots together, because none of the 16, so-called eight large, eight small, have opened. There will be one at Westfield because of the Olympic village, which I think, again, is an illustration that for industry to invest in this kind of facility there has to be a wider perspective. The location is somewhere that people are going to go. Just allow the industry to look at where there is a business proposition that holds up and makes sense within the framework that Parliament and Government have laid down as to what the ratios are.

Q192 Damian Collins: It seems to me that what we are really talking about is the regulation of fixed odds betting terminal machines and where they go, be it betting shops, small casinos, large casinos. That seems to be what the debate is about because that underpins the commercial viability of all these different formats of gambling.

John Greenway: We were clear that FOBTs should only be in casinos and in betting shops. I don’t know what in the end the Government view is going to be about FOBTs. It looks as though by default the probation period has come to an end, but I don’t think it has ever been formally lifted, has it? I am not sure about that. Undoubtedly they are profitable for the facilities, but equally undoubtedly people enjoy playing them, because they wouldn’t do it otherwise. None of the research that has been done, and certainly the most recent review, has come up with a concept that they are particularly more addictive than other forms of gambling. People thought there might be a problem; I personally can’t see there is huge evidence of that.

Back to my earlier point, what is the difference between a casino with FOBTs and a betting shop with FOBTs? One you have gaming tables, the other one you have a counter where you go and place bets. More and more people are placing bets through telephone apps on horse races or by telephone betting or online through Betfair and so on. The whole idea was that there should have been more of a free market in this, but within the regulatory framework that the Gambling Commission imposed on everybody. I must say I do agree with the point that was made earlier. It happens in insurance and financial services, which is probably where my real expertise in life lies, that regulators have to have regard for the competitive nature of the industry and its health. Quite why the Gambling Commission should not have that as a responsibility as well, I don’t know. I think that is a change you could recommend.

Q193 Damian Collins: Finally, for the concept of the large regional casinos-and you said in your report you recommended seven in the different regions in the country-do you think there should be an open market for where they go or do you think they should be targeted at areas for regeneration? You highlighted Blackpool. I would be interested in your views as well on the case of the trial casino either going in Blackpool or Manchester.

John Greenway: Well, Chairman, you know that I have very strong views about this, so thank you for allowing me the opportunity to articulate them.

The Crowe committee was a complete and unmitigated disaster. Why the Government, given the total muddle that there was-and it is clear within our report. You don’t get-how many of us were there, 16 on the Committee, eight from each House-unanimity over a recommendation that says there is no joined-up thinking between the Department for Communities and Local Government, as it then was, and all the regional development agencies that should decide where or where not they should go, and the Department for Culture, Media and Sport, and the Treasury over the taxation, which we have touched on. For goodness sake, reconvene the committee and allow it to sit down and work this out. Quite frankly, once the process through the normal committee procedure-not the scrutiny Committee, the committee that, John, you acted for our party as spokesman, and Malcolm Moss, now working with casinos-was concluded, the committee should have been reconvened to look at this.

I had to constrain certain members of my Committee from insisting that we made a recommendation that a regional casino should be developed in Blackpool. They would have recommended to a man and woman that a regional casino should not be located in east Manchester because all the evidence showed that you don’t put them in neighbourhoods like that. That is my point about the Australian example. Quite how you could deal with it now I don’t know, but I agree, again, with the comment made earlier, that the appetite in Blackpool to do something, and this was a great opportunity, remains.

This may shock you but when you undertake a job like this it leaves an indelible impression on you. If I can share them with you, I have two memories that drive a coach and horses through the argument that the whole of society was against any of this kind of work. We interviewed two Salvation Army captains, one in Australia where we took formal evidence and one in Blackpool. Both were in favour of the big casino as against the gambling premises on the corner of the street. Both. We took evidence in Blackpool and there was only one voice against having the regional casino and that was a Liberal Democrat councillor. Adrian, no disrespect to you, but he was a Liberal Democrat councillor who had a bee in his bonnet and said, "We didn’t want this". The shop union was ambivalent. They were all over the place because they could see that certain jobs would be lost when certain shops got knocked down. On the other hand, there would then be new facilities and so on and so forth.

I think it is just a shame that this didn’t happen but Blackpool would have been as great a place as any to have placed it. Come on, Philip, you represent a seat in the north as well, and I used to, and both Yorkshire. The fact is that towards the end of the 19th century these kinds of seaside towns became the place that people went because it had the facilities for things that people wanted to do. In the modern era I think a multifunctional development that included a casino that helped pay for it was a very good idea, but it has sadly gone.

Q194 Damian Collins: This is my last question, but is your vision of them as destination resorts?

John Greenway: Absolutely. Absolute destination resorts. People have to make the effort to go and just like in Las Vegas a lot of people will go. They will go into the Venetian equivalent and they will go to the wonderful restaurant and never go anywhere near the gaming floor.

Q195 Philip Davies: Is the amount of money the gambling industry gives to tackle problem gambling enough?

John Greenway: It probably is not, but I have to say one of the few positives that has emerged from the Gambling Act has been the huge increase that the industry has given for problem gambling. When I took over as chairman of what was then RIGT, in the previous year we had raised just less than £2.2 million. Three years later, by the time I gave up, and then I did a year as the president, we were virtually on £5 million and this has all been voluntarily given by the sector.

Let me comment on the conversation I overheard before. Mr Collins, I think it was you who asked the question about the drinks industry. I have no axe to grind in this at all, just let’s get some facts out. The drinks industry is not contributing money to the real treatment of people who have alcohol problems that cause ill health. My problem as chairman of RIGT was that most of the money that we raised we gave to GamCare to treat problem gamblers, or we gave it to the Gordon House facility up in Dudley. I went there and I sat in a room this big with about 30 of them and, do you know, they all had comorbidity. They were all alcoholics or drug addicts or smokers or whatever else. They all had comorbidity and it was actually the gambling industry that was coughing up money to make that contribution. We had a year, while I was chairman, of the pressure of the Sword of Damocles hanging over us: "If you don’t get it up to £5 million or get a deal for £5 million there will be a statutory levy".

The Government said that the health service should be dealing with the people who have serious psychological disorders that relate to their gambling. It is proving very difficult to get that result. If we could get everybody who is profiting from the gambling sector in the United Kingdom making a proper contribution, you could probably see the money that comes into GREaT go up by 50% or 60%, £7 or £8 million I would have guessed.

Q196 Philip Davies: The amount that is divided between research, education and treatment, are the right proportions given to each or is it out of kilter somewhere?

John Greenway: I agree with Neil Goulden and his view as current chairman is no different to what mine was. I would like to see more emphasis on education. We set up the Gamble Aware website when I was chairman and to what extent it has been effective is hard to judge but I do think it is a vehicle through which you can educate people to stop them becoming problem gamblers in the first place. I don’t think Government can just say, "Well we have no interest in any of this". As I said earlier, if the Treasury suddenly whacks huge great taxation increases on an activity that is regulated by Government and allowed by Parliament to take place then surely to goodness they have an interest as well. I think that more could be done. I am not sure, to be honest, that in relation to what is now the GREaT Foundation-I know it is the Gambling, Research, Education and Treatment Foundation-there is a huge argument in favour of it contributing hugely to research. Education is different, but I think for the research to be completely independent of the industry I would much prefer to see that funded elsewhere.

Q197 Philip Davies: Do you think that there is enough evidence about the causes and prevalence of problem gambling in order to justify the Government further deregulating the gambling industry?

John Greenway: I would answer your question by putting it the other way around. Successive prevalence studies have shown that the proportion of problem gamblers in society is pretty static. Let us be fair about this, people are not stupid and people have tight budgets, so their spend at the bingo club or in the betting shop is an area where they suddenly start to spend less. I do not think the prevalence studies have indicated that there is an issue such that you should keep the total grip of restrictions on the sector that we have now, but it is quite clear that changes need to be modest. I would see no appetite for a huge increase in the number of casinos. Moving the licences around would seem to me to make sense. Whether you allow some betting shops to have more than four FOBTs-you have a regulator, the Gambling Commission, use them. Why can’t they make a judgement about that? I don’t think that this argument that we are a nation of problem gamblers, therefore we should impose more and more restrictions, holds water. I can understand the emotion of it, but I just don’t think it stacks up.

Q198 Philip Davies: Do you think the constraint on the Government deregulating the industry can be summed up by using the words Daily Mail?

John Greenway: The Daily Mail did a hatchet job on all 16 members of the scrutiny committee. On a Saturday morning I went to Newmarket races, I think it was probably about this time. I looked it up: we started taking gambling evidence, Chairman, on 21 October 2003, and I think it might well have been at the end of that week-it was about that time. They said that every member of the committee bar one, who was Lord Walpole, had links to gambling. Alan Meale and I were both advisers to the Tote on horse racing, somebody else had something else-so they had an agenda. I said earlier, they saw this as a way of blaming Tony Blair because at that time-come on, you and I as Conservatives, I have to smile about that, that it was all his fault, which it wasn’t, but nevertheless that was the line of attack they took. Quite frankly, the arguments against what they were saying were all in the scrutiny Committee evidence. There are two other volumes this big, and I don’t think opinion has changed in any of this.

The worry I would have now, which maybe lies behind your question, is clearly there are some sensible changes that need to be made. You have listened to all the evidence, and I have only heard third hand what some of it was, but I think you could make some changes in a SI form that do not require primary legislation that would just help the industry a bit. If you could find a way to have a big new regional casino-come on, the economy is on its knees, people need jobs. There is a huge opportunity and other countries have done it. You are not reading in national newspapers in Spain that the big casino there causes trouble, or in the Far East. Now people from the UK get on a plane and go there. We should do it. Come on, you are in a big seaside town, you know exactly what I am saying.

Q199 Chair: There doesn’t appear to be huge enthusiasm from the operating side.

John Greenway: Well, I think the Americans have gone home. That is why I think as well, another observation, the idea of the no limit on stake and prize machines-I think we recommended £1,250 on them be a limit, this was going to fund all of this. I think that is not going to happen, they have gone away, but I still think there is a-

Q200 Chair: You think they have gone away. Even though you would allow a regional casino, you do not want-

John Greenway: You would have to ask them, John, but I am not conscious that there would be any appetite now, and I don’t think the sector has. You heard it this morning: I don’t think Ian Burke actually said, "We are happy if the regulator says it can only be 186, I think there could be some modest growth", but there never ever was going to be anything other than modest growth, and the fact is that the large and small licences that were applied for, 10 out of 16 in existing permitted areas, have not been taken up. It has to change.

Q201 Chair: Finally, what do you think of the Gambling Commission? Do you think it is doing a good job?

John Greenway: One thing we have not talked about is the three statutory objectives, and I think these are important. The statutory objectives are keeping crime out of gambling, making sure that punters, people who take part in gambling activity, get a fair deal, and protecting the vulnerable and children, I think they are all extremely important. To what extent they were a problem before the 2005 Act I think is something that is open to argument, it is open to debate, but the industry has embraced all of that. You heard again from the earlier witnesses. I think the sense that the huge cost increase they all experienced the minute the Commission came in, three or four times what they paid before, was a bit of a jolt. I think to some extent that has now stabilised.

Where I think the Commission could perhaps be more effective is to take a more risk-based approach. Look at where the risks are in relation to those three objectives, because that is what they are answerable to the Minister and to Parliament over. Having an advisory or a role in which they say to Government, "This aspect of the industry, there are problems here, you need to do something about this"; making recommendations more forcefully, perhaps on machine numbers, without this constant sense that somehow or other they will be badly judged if a mistake is made; a gradual change of culture within the Commission to be slightly more pro the industry and a good go-between, between you in Parliament and the sector, and guardians of, in a sense, the public interest in this area-I would have thought that was a way in which this could progress. It certainly is more expensive than it was before but, Philip, it is nothing compared to the Financial Services Authority.

Chair: I think that is all we have. Can I thank you very much, John.

John Greenway: It has been a great pleasure.