House of Commons - The Gambling Act 2005: A bet worth taking?

The Gambling Act 2005: A bet worth taking? - Culture, Media and Sport Committee Contents

2 The three objectives of gambling regulation

Gambling and crime

Licensing objective 1
Preventing gambling from becoming a source of crime or disorder, being associated with crime or disorder or being used to support crime.

16. We found no evidence that the 2005 Act has led to any significant positive or negative change in the levels of crime and disorder associated with the gambling industry. Many of our witnesses agreed with the Remote Gambling Association that "the British gambling industry has an excellent track record in combating crime and protecting the vulnerable".[10] There was a general consensus among industry contributors that the Gaming Act 1968 had already successfully controlled gambling-related crime and that the 2005 Act made minimal, if any, improvements in this regard. The casino and bingo operator Praesepe plc said that the 2005 Act had been "effective in maintaining the position that was already well established prior to the introduction of the Act",[11] while the Rank Group observed that "a 'clean' industry has been kept clean".[12]

17. Some submissions indicated that the minimal improvements that there had been regarding the first objective involved the way illegal activity was dealt with as a result of the Act. Nikolas Shaw Limited, a small gambling company operating across the casino, betting shop and arcade sectors, stated that unlawfully sited gaming machines and illegal poker had been "curbed" under the 2005 Act, whilst the Remote Gambling Association suggested that the Act had "brought greater levels of consistency to how [...] threats [of illegal activity] are addressed".[13]

A fair and open industry

Licensing objective 2
Ensuring that gambling is conducted in a fair and open way.

18. We heard no evidence that the onshore gambling industry is conducted in a way which is not fair and transparent to the consumer. Whether or not this is attributable to gambling legislation or is simply the outcome of a competitive market is not clear. Betfair held that the high levels of openness and fairness, which it said predominated in the online, offshore sector, existed "primarily because companies active on the UK market choose to operate to the highest standards".[14] "Multi-licensed companies", it argued, elected to go beyond the customer protection standards enforced under the 2005 Act.[15] However, Betfair also pointed to the fact that other jurisdictions required additional customer protection measures like Know-Your-Customer (KYC) and anti-money laundering checks across all sectors, whereas in the UK these were only required for land-based casinos.[16]

Problem Gambling

Licensing objective 3

Protecting children and other vulnerable persons from being harmed or exploited by gambling.

DEFINING PROBLEM GAMBLING

19. The term "problem gambling" can be defined in different ways and can include excessive gambling, where an individual gambles more money than he or she can afford, which is a matter for subjective assessment, as well as compulsive gambling (where an individual suffers from an addiction). We use the term to mean that a person continues to gamble despite harmful negative consequences or a desire to stop.

20. Evidence from faith and community groups focused on the harm to individuals and society which they attributed to problem gambling. They argued that problem gambling was a significant and growing issue and that it had a negative impact on society that exceeded the benefits generated by the gambling industry. Quaker Action on Alcohol and Drugs argued that the "moral and practical question for legislators—which was not squarely faced when the Gambling Act was passed—is whether profit for the industry, and an increase in gambling opportunities for the consumer, are worth these human costs".[17] The 2001 Gambling Review Report cited a number of potential negative consequences of gambling, including: job loss, absenteeism, poor work/study performance, stress, depression and anxiety, suicide, poor health, financial hardship, debts, asset losses, exposure to loan sharks, bankruptcy, resorting to theft, imprisonment, neglect of family, impacts on others, relationship breakdown, domestic or other violence, burdens on charities and burdens on the public purse. The Gambling Review team recognized that levels of problem gambling might rise as a consequence of some of their recommendations.[18] The then Secretary of State for Culture, Media and Sport, Tessa Jowell MP, gave assurances that:

If evidence of harm emerges through the research and monitoring that is undertaken, we will act swiftly to toughen the controls. We have powers throughout the Bill to withdraw or move back from the liberalisation if there is evidence of harm.[19]

EXTENT OF PROBLEM GAMBLING

21. Different sectors of the gambling industry told us that, although they accepted the principle that one problem gambler was a problem gambler too many, they believed that rates were low and had not increased significantly since the introduction of the 2005 Act. A number of submissions suggested that the risks of problem gambling were over-stated.[20]

22. The most recent British Gambling Prevalence Survey (BGPS) (sponsored by the Gambling Commission) estimated the actual number of problem gamblers in the UK in 2010 at between 360,000 and 450,000 adults,[21] though the accuracy of this figure is by no means certain. To put this figure in context, the number of adults who said that they had taken part in some form of gambling in the past year (in 2009/10) was about 35.5 million, which is 73% of the adult population.[22] The GREaT Foundation, which raises money from the gambling industry to fund research, education and treatment programmes aimed at reducing problem gambling, compared the number of problem gamblers to the rates for other public health issues in the UK saying that:

The incidence of problem gambling [...] pales into social insignificance when compared to smokers (13 million), those with alcohol or drug problems (6 million) and obesity (16 million).

23. The 2010 BGPS, the third in a series of surveys,[23] was the first to be carried out after the implementation of the 2005 Act and was meant to provide a benchmark for assessing the level of participation in gambling in the UK as well as the prevalence of problem gambling. However, it was not specifically designed to provide information about why any changes had taken place, so it can give no firm evidence about the effects of the 2005 Act on the incidence of problem gambling.

24. Some of the figures produced by the BGPS are set out below and illustrate the broad finding that levels of participation in gambling activities had increased between the second BGPS in 2007 and 2010.

73% of people aged 16 and over participated in some form of gambling in the previous year—around 35.5 million adults—representing a return to the higher rates observed in 1999 from 68% in 2007.
56% of adults participated in a form of gambling in the previous year, excluding the lottery. Comparable estimates for 1999 and 2007 were 46% and 48%.
4% of adults reported that their gambling involvement increased in the previous year, 13% that it decreased, and 82% that it had stayed the same.
Findings suggested that the prevalence of problem gambling appears to have increased from about 0.6% in 2007 to 0.9% in 2009/10.[24]

25. It is important to note that, whilst the increase in the number of problem gamblers observed between 2007 and 2010 is most likely to be 0.9% (a 50% rise), the increase could in fact lie within a range of between 0.7% and 1.2%.[25] In other words, the percentage increase could be in the order of between 16% and 100%. Whilst the most likely level of increase identified by the BGPS is 50%, this result is defined as only marginally significant due to factors such as the relatively small sample size.

26. Whilst it is agreed that the findings of the BGPS are significant in the sense that they are 'statistically significant', there is debate as to whether this translates into 'real-world' significance. Gambling industry representatives argue that little has changed, with the Bingo Association stating that: "levels of problem gambling remain broadly the same as before the Act was implemented".[26] However, Professor Orford, from the University of Birmingham, argued against this view, saying that the increase was significant in real terms, and adding:

The best evidence is suggesting that it [the number of problem gamblers] is far from stable, that it has actually gone up significantly over the last three years.[27]

Heather Wardle, from the National Centre for Social Research, said that:

On the balance of probability, the increase is real and likely.[28]

27. The imprecise nature of these findings also results in part from the lack of any significant studies on the causes of problem gambling. Professor Orford told us that the increase in problem gambling levels was as a "consequence of the changes introduced under the Act".[29] Whilst we recognise that the figures from the BGPS show a likely increase of 50% in the numbers of problem gamblers, we have seen no hard evidence to support the view that this increase was the result of the 2005 Act.

28. The BGPS was criticised by some as being a tick-box exercise and prone to classifying casual gamblers (who may place a bet only five or six times in a year) as problem gamblers.[30] Graham White and Phillip Brear, from the Jersey and Gibraltar gambling regulators, agreed that BGPS methodology was "suspect" as "you need to tick only three boxes on the problem gambling scale and you are a problem gambler by definition".[31] Mr White gave the example of somebody answering "yes" to the question "have you ever lied about your gambling habits?" because they had told their spouse that they had bet £10 rather than £20 at Cheltenham.[32] A lack of discrimination between enthusiastic and problem gamblers could therefore lead to a number of false positives. It is worth noting that the two approaches used in the 2010 survey identified different sets of respondents as problem gamblers. However, it is also worth noting that the methodology used remained the same for all three BGP Surveys. Therefore, although it may be unwise to extrapolate figures from the BGPS to the population as a whole, the successive surveys provide comparability across time.

29. On our visit to Australia, we were told that the most relevant statistic on problem gambling was the total proportion of gamblers who were problem gamblers, not the proportion of the total population who were problem gamblers. This was because the former measure allowed an assessment to be made of the likelihood of a gambler, or somebody who gambles in a certain way, becoming a problem gambler. The 2010 BGPS shows that—amongst those who had gambled in any form at least once in the past year—problem gambling prevalence rates were around 1% to 1.3%.[33] The rate of problem gambling among those who gamble is, of course, higher than expressed as a percentage of the total population. However, around 1% remains a low figure, supporting arguments from the gambling industry that gambling should be seen as a legitimate leisure activity, though one for which appropriate safeguards should be in place to protect the vulnerable.

30. Further evidence on problem gambling comes from overseas studies, in particular those conducted in America and Australia.However, such studies must be treated with caution when attempting to draw conclusions about the UK gambling market. As Professor Griffiths of Nottingham Trent University commented in a study for the Gambling Commission, "the applicability of evidence from overseas needs to be assessed further because regulatory, geographic and venue information as well as machine characteristics (including the size of stakes and prizes) in other jurisdictions differ".[34]

31. An area of consensus between industry bodies, faith groups and academics alike was the need for more and better evidence on problem gambling and specifically about its causes. The 1978 Rothschild Royal Commission found that there was a "serious shortage" of information and recommended that a "Gambling Research Unit" be established by the Government.[35] The then Culture, Media and Sport Committee produced a Report in 2002 noting that "the consensus was clear that not enough objective data [about problem gambling] had been collected or analysed".[36] It is now nearly five years since the 2005 Act was fully implemented in 2007 and this situation has changed remarkably little.

32. In addition to the industry's voluntary annual contribution of £5 million for Research, Education and Treatment programmes, the Government previously provided funding for the British Gambling Prevalence Surveys. The Government has now withdrawn funding for future British Gambling Prevalence surveys without giving any indication that it has considered other options, either for obtaining funding for similar studies elsewhere or for commissioning other forms of research. We recommend that the Government works with the Gambling Commission to provide a clear indication of how it intends to ensure that sufficient high-quality research on problem gambling is available to policy-makers. It is particularly important that research is seen to be independent and comparable over time to show whether or not there is a change in the levels of problem gambling.

UNDER-AGE GAMBLING

33. An area of understandable concern for groups interested in the social impact of gambling is under-age gambling. A 2009 survey carried out by Ipsos MORI for the National Lottery Commission found that 2% of 12-15 year olds (about 60,000) were problem gamblers. This is a higher prevalence figure than for adults, despite being lower than in previous studies.[37] The Methodist Church of Great Britain argued that research was needed to establish whether there was a link between "youth gambling and later problem gambling",stating that "early exposure to gambling is linked to later patterns of problem gambling".[38] Both the 2009 Ipsos MORI survey and a further survey for the National Lottery Commission concluded that "exposure to gambling generally is [...] linked with higher rates of gambling".[39]

34. The Rank Group described the level of under-age gambling as "unacceptably high", but said that the data on under-age gambling was "frustratingly inconsistent and, as a consequence, it was difficult to gauge either the extent or the trend in under-age gambling".[40] Business in Sport and Leisure (BISL) told us that the 2005 Act had reduced the risk of those under 18 gambling by restricting machines to licensed premises. DCMS's position was that protecting children from gambling-related harm had been a notable success of the 2005 Act, and that it was now time for the industry itself to assume responsibility for monitoring and enforcing safeguards to protect children.[41]

35. The bingo and casino sectors argued that they performed well in preventing under-age people from gambling with them. The Rank Group said that "licensed bingo clubs and casinos—which provide high levels of supervision, including regulated entry—jointly accounted for just 0.09% of all recorded incidents of under-age gambling in 2008/9, compared with adult participation rates of 8% and 5% respectively".[42]

36. In May 2009, the Gambling Commission carried out a test-purchasing scheme covering about 80% of major betting shop operators to measure the success rate of industry safeguards against under-age betting: 98% of the under-18 year-olds involved in the test were permitted to gamble. The Association of British Bookmakers responded by signing up to a new Code of Practice and Action Plan, which entailed introducing a board-level 'champion', new signage, staff training and commissioning further test-purchasing exercises. On retesting, the 98% failure figure improved to a 65% failure rate out of 160 shops visited; and in 2010, one test recorded a failure rate of 26%.[43] The Gambling Commission stated that it was encouraged by the positive reaction of the industry to its original poor performance.

37. More recent studies by the Commission focusing on other gambling sectors including Adult Gaming Centres show a significantly lower failure rate of about 29%.[44] The figures from the Adult Gaming Centre sector were described by the Gambling Commission as "encouraging" but indicating that there was "still scope for further improvement".[45] DCMS argued that this was an area where the industry should assume responsibility for monitoring and enforcing safeguards.

38. We note the wide variation between sectors in the ease with which 'under-age purchasers' have been able to evade the safeguards designed to protect them from gambling. In particular, we are very concerned about the continuing comparatively high failure rate of betting shops (against other kinds of gambling premises), which—thanks to the 2005 Act—are now able to host casino-style roulette machines. We recommend that the Gambling Commission continue to monitor the ability of children to access gambling premises through regular test-purchasing schemes rather than handing the responsibility to monitor and enforce age-restrictions to the gambling industry. The Gambling Commission, working with local authorities, should also take swift enforcement action where an operator fails to introduce sufficient access and age-verification controls.

39. There has been insufficient data collected to establish whether or not the 2005 Act has been successful in its aim of protecting children from gambling. This highlights a particular need for more research in this area.

PREVENTING PROBLEM GAMBLING

The regulatory pyramid

40. As already explained, gambling is often broken down into "hard" and "soft" types.[46] We received many submissions arguing that some forms of gambling intrinsically pose a higher risk of causing or exacerbating problem gambling because of their speed of play and often high stake and prize levels.[47] While Professor Orford cautioned that a link between gambling forms that feature fast, repeated play, including casino games and machine gambling, had been difficult to establish as "many people gamble on more than one activity",[48]Professor Griffiths, a gambling specialist at Nottingham Trent University, noted in a study for the Gambling Commission that "compared to non-problem gamblers, problem gamblers tend to play on gaming machines more frequently and spend more time and money on them".[49]

41. The 1968 Act put in place a "regulatory pyramid", meaning that harder forms of gambling were confined to locations with tighter controls on, for example, access. The 2005 Act, as well as more recent developments, have disrupted this 'pyramid', as online gambling—much of which is not subject to UK regulation—has developed and some 'harder' forms of gambling (such as casino-style gaming machines) have been permitted in traditionally 'softer' locations.

42. We deal with the various issues surrounding online gambling in the next chapter. We turn now to the issue of gaming machines.

GAMING MACHINES

Machine allowances

43. Gaming machines are important to the gambling industry because of their revenue-producing potential, which is in part attributable to their low labour costs. The Gaming Act 1968 permitted three types of gaming machines.

Jackpot machines were allowed only in casinos, bingo halls and in members' clubs (all of which had restrictions on entry for non-members and, in particular, had age restrictions). Jackpot machines had a maximum stake of 50p (£2 in casinos); the maximum prizes varied according to where machines were located: £4,000 in casinos; £500 in bingo halls and £250 in clubs.
Amusement With Prizes (AWP) machines were mainly found in arcades, but could be located in other premises, such as fish and chip shops, with the consent of the local authority. They had a maximum stake of 30p. The maximum prize was £5 in cash or £8 in tokens or another non-cash prize.
All-Cash machines were located in arcades, bingo halls, pubs and betting shops and had a maximum stake of 30p, with a maximum prize of £25.

44. The classification system for gaming machines under the 1968 Act was, to say the least, complex: it was described by the 2001 Gambling Review Report as "incoherent and full of anomalies". The review also noted that the then regulator (the Gaming Board for Great Britain) had within its jurisdiction only that minority of machines which were situated in casinos and bingo halls.[50]

45. The 2005 Act established a new system for categorising gaming machines (A, B, C, and D). The table below sets out the current categories and their associated stake and prize limits.

Machine Category Maximum stake (from July 2011) Maximum prize (from July 2011) Venues

A Unlimited Unlimited Regional Casinos (none available)

B1 £2 £4,000 Casinos

B2 £100 (in multiples of £10) £500 Casinos, Betting Shops

B3 £2 £500 All licensed venues except pubs, clubs and travelling fairs

B3A £1 £500 All licensed venues except pubs, clubs and travelling fairs

B4 £1 £250 All licensed venues except travelling fairs

C £1 £70 All licensed venues except travelling fairs

D non-money prize (other than crane grab machine) 30p £8 All licensed venues

D non-money prize (crane grab machine) £1 £50 All licensed venues

D money prize 10p £5 All licensed venues

D combined money and non-money prize (other than coin pusher or penny falls machines) 10p £8 (of which no more than £5 may be a money prize) All licensed venues

D combined money and non-money prize (coin pusher or penny falls machines) 10p £15 (of which no more than £8 may be a money prize) All licensed venues

Table 1: Source: Gambling Commission guidance [51]

46. As illustrated above, the 2005 Act continues a regime of permitting different types of machine, and different numbers of permitted machines, in various types of venue (depending on whether they were seen as suited to 'hard' or 'soft' gambling). While the regime was always rather complicated, the 2005 Act has increased the complexity by introducing separate licensing categories for three types of new casino (Small, Large and Regional), while retaining a fourth category of the pre-existing (1968 Act) Casinos.

The 2005 Act specified that category A machines, with unlimited stakes and prizes, should be allowed only in Regional Casinos. However, Regional Casinos were not introduced because the Bill was amended to allow only one Regional Casino and the Statutory Instrument needed to allow its development was then defeated in the House of Lords in 2007;[52] as a result no category A machines are currently available in the UK.
Other casinos are now permitted B1 machines—the numbers of which are limited by their ratio to gaming tables—with a £2 stake and £4,000 prize limit and B2s with a £100 stake and £500 prize limit.
Betting shops are also allowed up to four machines, all of which may be B2s.
Bingo clubs are allowed up to eight B3 or B4 machines, and an unlimited number of C and D machines.
'Adult gaming centres' are permitted a limited number of B3 or B4 machines, as well as machines from lower categories.
Private clubs, pubs, and 'family entertainment centres' are permitted C and D machines. Members' clubs and miners' welfare institutes are the only places allowed to offer B3A machines.

47. When we asked Jenny Williams, Chief Executive of the Gambling Commission, about the rationale behind machine categorisation she told us that the "categories that were put in place were, essentially, a result of discussion—trade-off, whatever you call it—in Parliament at the time about how precautionary the then Government felt they wanted to be".[53]

48. We were told by the Gambling Commission and by DCMS that gambling policy must be evidence-based. It is apparent, however, that the allocation of gaming machines under the 2005 Act is complex and was not made on the basis of solid evidence about the risk of problem gambling.

Anomalies

49. The 2005 Act removed gambling opportunities from many public areas, such as food outlets, and there was general agreement among our witnesses that while the classification system was "somewhat rough and ready" it was broadly justifiable as it limited machines with higher stakes and prizes to more controlled venues.[54] However, in the view of a number of our witnesses, the regulatory pyramid had been undermined by the approach taken in the Act to one specific type of gaming machine, the B2. The Casino Operators Association argued that the measured approach to availability of gambling machines had been "completely negated by the fact that 8,800 Licensed Betting Offices have been allowed to offer four hard-core casino gambling machines in each of their shops."[55] The Methodist Church described it as "worrying" that, as it saw it, the distinctions between "gaming environments and hard gaming locations" were "increasingly being eroded".[56] Simon Thomas, a member of the gambling industry and trustee of GamCare, suggested that the Act could have reduced the prevalence of problem gambling: the "principles behind the Gambling Act were sound and if it had controlled hard gambling on the high street [...] appropriately then the issues related to problem gambling would be less".[57]

50. B2 machines (FOBTs) have proved the most controversial form of gambling machine in terms of their potential impact on problem gambling. While other category B machines have the same £500 maximum prize as B2s, it is possible to stake up to £100 on a single bet (most commonly a single spin of the virtual roulette wheel) on B2s whereas other category B machines have a maximum stake of £2. Prior to the 2005 Act, FOBTs were not classed as gaming machines under existing legislation so there were no limits on where they could be placed and in what numbers.[58] Richard Caborn, former Minister for Sport and Tourism, said that if they had not been controlled, "you would have had wall-to-wall FOBTs in this country".[59] As a result of growing concern about the proliferation of these machines, a deal was reached between DCMS, the Gaming Board and the Association of British Bookmakers (which represents 85% of the UK's betting shops): a Code of Practice for FOBTs was introduced, limiting the number of gaming machines, including FOBTs, per betting shop to four.[60] It also set limits on stakes and prizes; banned all casino-type games except roulette; set a minimum time interval between bets; and introduced signage and help pages on machines to deter problem gambling and assist problem gamblers.[61] A subsequent inquiry—commissioned by the Association of British Bookmakers at the request of DCMS—concluded that "there is no evidence in this study which suggests that FOBTs are closely associated with problem gambling".[62] As a result, FOBTs were effectively "taken off probation" under the 2005 Act and classed as B2 machines. The limit of four machines per premises was reached as a trade-off between the DCMS and the industry.[63]

51. The betting shop sector argued that B2 machines do not pose a significant risk of problem gambling. David Steele from William Hill cited the fact that there was no difference between the rate of problem gambling between the 2001 and 2009 British Gambling Prevalence Surveys (0.6% for both years), despite about 30,000 B2s being introduced between those surveys. FOBTs had been available in betting shops, however, since 2001. On the opposing side, several faith groups, including Quaker Action on Alcohol and Drugs and the Evangelical Alliance, said that "a large body of research shows that gaming machines are one of the riskier forms of gaming […] because of their strongly reinforcing features".[64] In evidence to the 2003 Joint Committee on the Draft Gambling Bill, GamCare said that it had noticed an upward trend in people requesting help on B2s (FOBTs).[65] Some of its witnesses said that B2 machines had been described as accelerants or catalysts to problem gambling and Gordon House said that an applicant for its help had called B2s "the crack cocaine of gambling".[66]

1) Casinos

52. It was widely agreed that casinos, with their strict entry controls and regulation, are the appropriate location for hard gambling, including machine gambling.[67] Simon Thomas of the National Casino Industry Forum (NCiF) told us that "having operated seaside arcades, inland arcades, bingo halls, I can say with my hand on my heart there is no level of regulation and protection like we are getting in the casino industry, particularly money laundering and every single member of staff being certificated".[68] However, under the current regime some types of casino are permitted considerably lower stake limits than high street betting shops. The NCiF argued that casino-style gaming machines such as B2s should be allowed only in the heavily regulated environment of the casino:

Casinos, at the top of the regulatory pyramid are permitted only Category B1 machines with a maximum £2 stake. Of the 144,110 licensed slot machines in the UK, only 2400 or 1.6% are in casinos while there are over 32000 B2 machines in 8500+ high street betting shops offering £100 stakes on a game that plays every 20 seconds and nearly 12000 B3 machines in bingo clubs and seafront arcades also with a proposed £2 stake.

The NCiF's spokesman, Simon Thomas, explained that the challenge faced by casinos was that "above us we have the internet with very high stake gaming machines available and below us we have the betting shops with £100 stake machines". He therefore proposed a "£5 stake and a £10,000 prize" limit for the casino sector's B1 machines.[69]

53. Casinos are the most highly-regulated sector and they are therefore the most appropriate venue for hard, high-stake forms of gaming. This is not reflected fully in the current allocation of machines. We believe that it is illogical to restrict the games available in highly regulated land-based casinos when B2s, with high stakes and prizes, can be accessed in betting shops. The Government should address the current imbalance by permitting casinos to operate up to twenty B2-type machines with a maximum stake of £100.

2) Betting shops

54. Decreasing the limits on maximum stakes on B2 machines in betting shops (£100 stake on roulette games) to something closer to those available in other high street locations such as arcades, pubs and bingo halls (£2/£1) could cause financial difficulties for betting shops. About 50% of the profits of betting shops derives from machines and their business model has become very reliant on them.

55. The betting shop industry argued for an increase in the current allowance for B2 machines. David Steel of William Hill told us that, because of physical restraints and levels of demand, "five or six (B2 machines) would certainly satisfy demand at the high points of the day for the vast majority of shops in the UK".[70] Witnesses from the Rank and Gala Coral Groups expressed the opinion that numbers of machines were not linked to problem gambling, as it was impossible to play more than one machine at a time. However, during the visit to Mecca Bingo in Dagenham, we noted the fact that some customers can, and do, play on a row of machines simultaneously. DCMS Minister John Penrose also stated the possibility that limiting machine numbers, for example, in betting shops could lead to players being unable to reach a vacant machine immediately, thus experiencing a cooling-off period.[71]

56. During the Second Reading of the Gambling Bill in 2004, Tessa Jowell MP stated that the Government would "monitor very closely any evidence that the availability of these [B2] machines is leading to an increase in problem gambling, in which case we will take action through the Gambling Commission to address the matter".[72] She also raised her concerns about the rate of play for B2 machines, saying that "if you play constantly for an hour, you could lose £18,000 an hour. I would be concerned about that".[73]

57. We recommend that research be commissioned by the Gambling Commission to assess the potential of types of gambling to contribute to problem gambling levels, in particular whether there is a link between features including speed of play, stake and prize levels, accessibility and numbers of gaming machines, and problem gambling.

Reasons for clustering of betting shops

58. Whilst acknowledging that the geographical distribution of betting shops was changing, the Association of British Bookmakers (ABB) pointed out that there had been no net increase in the number of UK betting shops since the 2005 Act came into effect in September 2007. They also pointed to "several examples of LBO [betting shop] openings being blocked in a number of London boroughs over the last twelve months" as evidence that no additional action or legislation was necessary in this area.[74]

59. However, we were informed of three possible factors contributing to the clustering of betting shops: one was simply related to the planning system; a second involved the interaction between the planning system and the 2005 Act; and the third related solely to a possible anomaly created by gambling regulation.

60. Betting shops are classed—under the current planning system—in the same category as banks and building societies. As a result, there is no requirement for a change-of-use permission from a local council to convert, for example, a bank into a betting shop. At present, local authorities have to use an "Article 4" planning direction to prevent a new betting shop from being established in converted premises. However, the Local Government Association (LGA) told us that this process was very time-consuming, expensive and complicated. Furthermore, it said that Government proposals to require 12 months' notice of the use of an Article 4 direction—which reduces the likelihood of a local authority having to paying compensation to the planning applicant—risked further undermining the procedure's effectiveness. The LGA proposed allowing local authorities to develop their own classification system for planning purposes in order to make it more sensitive to local circumstances. [75]

61. Some of our witnesses called for changes to local planning powers to make betting shops sui generis (a class of their own), so that local authorities could control their number in any specific locality, if they wished.[76] This was the solution which was introduced by the 2005 Act in relation to casinos in order to allow local authorities to reject their development if they decided that they did not want a casino in their area. Placing betting shops into a use-class of their own was also a recommendation of the independent Portas Review into the future of UK high streets, published in December 2011.[77]

62. Secondly, prior to the Gambling Act 2005, the issuing of premises licences for betting offices, along with casinos and bingo halls, was subject to a demand test. The 2001Gambling Review Report concluded that the demand test stifled competition and reinforced the situation whereby a small number of large firms could control gambling markets, particularly in the casino sector; and that demand was best assessed by potential operators on commercial grounds alone.[78] The 2005 Act subsequently abolished the demand test and replaced it with an "aim to permit" clause. This meant that local authorities had a duty to license any premises which did not threaten any of the three licensing objectives set out in the Act.

63. Some of our witnesses argued that scrapping the demand test for gambling premises had made it easier for bookmakers to locate on high streets—mainly in inner city areas—which reflect the economic and ethnic mix which, they argued, operators target.[79] Though the ABB strongly believed that the existing licensing process and legislation offered "enough protection to local communities", residents' groups argued that the abolition of the demand test "effectively removed the ability of communities to make substantive objections to any licence application".[80] The London Borough of Haringey said that there was now "almost no restriction on how many gambling premises [could] operate in an area".[81] The Casino Operators Association argued for the reintroduction of the demand test, saying that "the Gaming Act 1968 effectively halted the uncontrolled proliferation of casinos in the UK largely through its demand test and permitted areas regulations".[82]

64. The third potential factor in the clustering of betting shops was the restriction—negotiated with the industry in 2004 and codified under the 2005 Act—on the number of B2 gaming machines (one of the 'harder' forms of casino-style gambling) which are permitted in each betting shop. The decision to allow a maximum of four B2 machines per shop encouraged betting shops to proliferate in some areas because the demand for B2 machines outstripped supply in any one betting shop, making it economically viable for them to cluster together.[83]

65. The Minister for Tourism and Heritage, John Penrose, told us that, if clustering proved to be a problem rather than a concern, Ministers would take the issue "extremely seriously".[84] Betting shop clustering is currently a local planning issue rather than one for the Gambling Commission, which would be expected to respond only if evidence emerged that betting shops or B2 machines were causing significant gambling-related harm. Mr Penrose informed us of a forthcoming consultation by the Department for Communities and Local Government which was likely to include some questions on the issue of gambling. He said that tackling this issue was "going to be a double action between DCMS and Communities and Local Government to make sure that the interplay between gambling regulation and planning is rightly based".[85]

66. The 2005 Act has had the unintended consequence of encouraging the clustering of betting shops in some high streets by removing the demand test and limiting the number of B2 machines permitted in each premises. The clustering of betting shops is a local problem which calls for a local solution. We therefore recommend that local authorities be given the power to allow betting shops to have more than the current limit of four B2 machines per premises if they believe that it will help to deal with the issue of clustering. The limit of four B2 machines under current legislation should be maintained as a minimum limit to create certainty for operators. However, if problems arise with individual betting shop chains or premises in connection with B2 machine use, local authorities should have—as a safeguard—the right to require the removal of any machines over the minimum allowance.

3) Bingo Halls, Arcades and Adult Gaming Centres (AGCs)

67. The adult gaming, bingo and arcade sectors argued that they had been most adversely affected by the 2005 Act. One of the key changes made by the Act was the removal of certain machines—known under the 1968 Act as section 16 and 21 machines—from arcades and bingo halls. Section 16 and 21 machines had a stake limit of £2 and prize limit of £25. They allowed up to 20 games to be played concurrently on the same machine meaning that the total prize could be £500. Section 16 and 21 machines were replaced with B3 machines with a £500 prize limit but a lower stake limit of £1. Therefore, previously a player had to stake £40 in order to have a chance of winning £500: now the stake for the same winnings could be as little as £1. The British Amusement Catering Trade Association (BACTA) told us that the removal of the section 16 and 21 machines from arcades had resulted in more than 200 amusement arcade closures in the previous 18 months, a fall in the number of amusement machines being manufactured from 55,000 to approximately 10,000 per annum, and hundreds of jobs being lost.[86] Leslie MacLeod-Miller of BACTA told us that "arcade revenues are down somewhere between 20% and 30%".[87] This view was supported by high street gambling company, Praesepe plc, and the British Association of Leisure Parks, Piers and Attractions (BALPPA).[88]

68. Kevin Allcock from Mecca Bingo told us that his company probably lost about £0.5 million of income "overnight" as a result of this change.[89] Although the limits on both the number of machines and the maximum stake payable were subsequently increased,[90] some feared that this might have come too late for some operators that had already suffered losses.

69. We support the original vision behind the 2001 Gambling Review Report in which bingo halls were to be maintained as social, soft gambling environments. In the case of Adult Gaming Centres we believe that they provide a controlled adult environment and have robust access controls, as demonstrated by their low failure rate in the Gambling Commission's test-purchasing scheme. We therefore recommend that Adult Gaming Centres are permitted B2 machines on the same basis as betting shops.

4) Commercial Snooker Clubs

70. The commercial snooker club operator, Rileys, argued that its business was specifically damaged by the removal of B3 machines from its premises under the 2005 Act, as well as by other factors such as the smoking ban. The company told us that the machines it had prior to the Act, which offered a maximum £500 prize, were "critical to the profitability" of its business, adding that, when they were removed, its revenues immediately dropped by £888,000 and were still in decline.[91] Rileys argued that it should be able to offer B3 machines with a £2 stake and £500 prize because it provided a controlled environment as a private members' club and already held an alcohol licence. Its suggested method for allowing this—to alter the Act to create a new operator's licence under section 65(4)—had, thus far, been rejected by DCMS. The Minister for Tourism and Heritage, John Penrose MP, told us that he sympathised "to a point" with Riley's position but that amending the Act to give further allowances to specific sectors, such as commercial clubs, had the potential to open the way for other private clubs to demand similar machines in order to compete or simply to maintain parity.[92] Rileys rejected this premise and pointed out that other private clubs, namely Working Men's Clubs, had never requested B3 machines. The company further argued that the strict criteria for entry to the market and the necessity of obtaining local authority and Gambling Commission approval would prevent a significant number of commercial clubs from taking advantage of any special provisions. The Minister suggested that Rileys could "work within the existing legislation" by opening Adult Gaming Centres adjacent to its venues, which would allow it to subsidise its existing business by using them to offer B3 machines.[93]

71. We recognise the potential pitfalls of amending the Act to meet individual hard cases and also note that it would be unlikely that the Government would be able to find room in its legislative programme for such amendments in the near future. However, it is clear that commercial snooker clubs have suffered disproportionately from the removal of B3 machines and are now struggling to remain profitable. We therefore recommend that commercial snooker clubs be permitted to offer B3 machines.

STAKES AND PRIZES

72. The impact of high stakes and prizes on problem gambling levels in the UK was disputed and much of the industry argued that limits should be increased.[94] Some groups held that there was a link between stake and prize limits and problem gambling. Quaker Action on Alcohol and Drugs cited the advice given to the Gambling Commission in 2009 by a panel of experts which reached a general consensus that stake-size was "a risk factor", primarily because high stakes could lead to high losses and therefore greater financial harm. The panel also concluded that setting stakes "too low" would "probably be among the least effective options for promoting responsible and safe play", by encouraging a 'grey market' of illegal and unregulated operators offering cheaper gambling opportunities.[95]

73. In 2011, stake limits for B3 machines were increased to £2 and the number of B3s allowed in adult gaming centres and bingo halls was raised to 20% of total machines. We asked the Minister about the rationale behind these increases in light of his insistence that further such changes would only be made on the basis of firm evidence that they would not cause harm. The Minister's response was, firstly, that the changes were a manifesto commitment and, secondly, that making (lower stake) B3 machines more "attractive" could draw people away from B2 machines. He acknowledged, however, that he did not have "solid ground beyond that".[96] We consider that the decision to raise the stake limit on B3 machines was made on the basis of little or no evidence. We welcome the Government's position that further changes to machine stakes and prizes should be evidence-based.

74. During our visit to Australia we examined how the industry and the Government had responded to problem gambling. In summary, though the picture is not yet clear, some of the innovations introduced seem to be fairly effective—such as messages that pop up on screen to break the trance-like state that repeated play of gaming machines may induce, and limiting the maximum stake. However, some of the more radical ideas, such as abolishing cash stakes and instead making machines operable only through smart cards with a pre-determined loss limit, have yet to be tested. It is important that the likely effectiveness of any measures for tackling problem gambling is assessed before such measures are put in place. We recommend that the Department for Culture, Media and Sport seek to learn from the experiences of other jurisdictions, such as Australia, which have implemented measures to combat problem gambling including educational programmes and machine displays showing time spent on them.

Tackling problem gambling

75. Throughout this inquiry we received significant amounts of evidence from the gambling industry stating that it regarded problem gambling as a serious issue—not least because of the significant potential for reputational damage—and had taken measures to tackle it. Much of the industry held that the Act did not provide much, if any, improvement in protection measures against problem gambling as the sector had already been operating in a socially responsible way. Ladbrokes told us that it had "voluntarily implemented" many of the Gambling Commission's Licence Codes of Practice "years before the introduction of the Act".[97] Other members of the industry told us that, long before the 2005 Act, they had been making financial contributions to organisations helping to tackle problem gambling, such as Gamcare, which runs a helpline, therapy services and prevention training for industry workforces, and the Gordon Moody Association, which provides residential treatment.[98] The bingo and arcade sectors, in particular, argued that their venues had a positive social impact on their local areas because of the employment they brought, as well as providing a social environment in which the local community could congregate.[99] Despite arguments that the 2005 Act changed little in reference to problem gambling, we regard it as an important step forward that, for the first time, the Act gave the Government the power—and the gambling industry the responsibility—to tackle problem gambling.

76. Codes of practice have been drawn up by industry groups to put in place measures to tackle problem gambling. As we have already discussed, as a result of concerns over B2s, a Code of Practice for the operation of B2s, including technical standards, was agreed between the major betting shop operators and the Gambling Commission in 2003. After the 2005 Act, the Gambling Commission introduced a Licence Conditions and Code of Practice (LCCP) document, which required all licensed operators to implement customer protection measures. Online companies, for example, must carry out age verification checks within 72 hours of customer registration. Betfair told us that much of the online industry also employed "Know-Your-Customer" (KYC) checks, as they are compulsory in some other jurisdictions, but which are not yet required by the Commission for any sector other than land-based casinos.[100]

77. We have seen that information about problem gambling and sources of help has been made available inside the gambling venues which we have visited. An information campaign, aimed at the relatives of problem gamblers, could lead to more people seeking help because relatives of problem gamblers may not enter gambling venues and see the information provided there. We recommend that the Department for Culture, Media and Sport develop a public information campaign outside of gambling premises to highlight sources of help for problem gamblers and their relatives. The Government should also make an assessment of the ability of existing support and advice centres to deal with any significant resulting rise in demand. If a significant increase is expected then the industry should fund, out of the existing voluntary levy, increased provision of advice and support by these existing centres.

SELF-EXCLUSION

78. One way in which individuals can attempt to tackle any problem gambling behaviour is by opting to be denied access to gambling premises—so-called 'self-exclusion'. The ability of customers to self-exclude from gambling premises is a significant feature of programmes to tackle problem gambling behaviour. The Gambling Commission also requires all except ancillary and software licence holders to provide information pertaining to self-exclusion options. However, there is currently no nationwide, cross-industry system for customer self-exclusion. Some of the international regulators from whom we heard evidence called into question the effectiveness of current (off-line) self-exclusion systems. Graham White, Chairman of the Jersey Gambling Commission said that:

You can walk into one casino and self-exclude—a week and two days later, you can go into another one. You can go into a bookmaker and self-exclude—a week and two days later, you can go into William Hill as opposed to Coral, for example. That is the weakness of the exclusion system.[101]

79. Figures from the Gambling Commission also suggested that there was a problem in some parts of the industry with self-excluders being allowed to gamble. Figures for the betting sector showed that, while the number of self-exclusions had gone up significantly (from 11,424 in 2008-9 to 20,823 in 2010-11), the number of "known breaches of self-exclusion" had more than doubled (4,033 to 10,468) between 2009/10 and 2010/11.[102] Other sectors had lower levels of self-exclusion, with the bingo sector experiencing a significantly lower number of both exclusions and breaches: the latter was down by 32% from 2009/10 to 2010/11.[103] GamCare told us that "the operation of self-exclusion largely depends on the vigilance of staff and there are many examples of the system breaking down".[104]

80. A study, cited by the Ladder Community Safety Partnership and produced by a group of organisations including GamCare and Manchester Metropolitan University, found that "gamblers who had self-excluded from one or two venues in a locality tended to move between different gambling operators as a strategy to avoid detection".[105] The study argued that a national self-exclusion system for problem gamblers would help this situation by greatly simplifying the self-exclusion process.[106] It was also argued that allowing a previously self-excluded customer to re-enter a gambling venue without requiring them to produce evidence that they had sought or received any form of problem gambling treatment could lead to that individual re-encountering problems.

81. We recognise the significant practical challenges that introducing a national "universal" self-exclusion system would involve, including confidentiality and legal issues. However, the Government should support the development of a system which would allow a customer to self-exclude from all forms of gambling regulated by the Gambling Commission.

RESEARCH, EDUCATION AND TREATMENT

82. Under the 2005 Act, a voluntary levy was introduced on the gambling industry to fund research, education and treatment (RET) programmes to tackle problem gambling. There is provision under the 2005 Act to make the levy mandatory if the Government were to decide that not enough money was being raised from the industry on a voluntary basis. Some witnesses argued that there was cause to introduce a compulsory levy on the gambling industry on the basis that it was not giving enough money to research, education and treatment programmes.[107] Others argued that, so far, the simple threat of a mandatory levy—described by the Evangelical Alliance as a "Damocles sword"—had proved sufficient incentive for the industry to provide the funding required.[108]

83. The Jersey Gambling Commission, which operates a similar voluntary levy system to the UK, argued that the levy should not be made compulsory, firstly, because this would cause hostility from the compliant industry and, secondly, because any percentage-based levy would unevenly impact on operators. Instead it suggested a flexible system, such as that provided under Jersey Law, which allowed a compulsory levy to be imposed only on non-compliant sectors. This would leave the already compliant sectors able to continue to give funds towards research, education and treatment on a voluntary basis.[109]

84. The voluntary levy for research, education and treatment has thus far been successful at raising the target of £5 million per annum. An important lever for obtaining funds from the gambling industry is the potential for reputational damage if insufficient monies were raised or if a compulsory levy were deemed necessary. While it is important that the option of enforcing a compulsory research, education and treatment levy be maintained, we recommend that the current voluntary levy is continued. However, should one or more sectors of the gambling industry fall short in their duty to fund research, education and treatment programmes, the Government should implement a compulsory levy on those sectors.

THE TRIPARTITE STRUCTURE FOR RAISING AND DISTRIBUTING THE LEVY

85. Before the 2005 Act, a body called the Responsibility in Gambling Trust raised and distributed funds for research, education and treatment. Its responsibilities were split after the implementation of the 2005 Act: the industry-dominated GREaT Foundation became the fundraising arm of a tripartite structure involving the Responsible Gambling Strategy Board (RGSB) and the Responsible Gambling Fund (RGF). Overall policy aims and strategy are set by RGSB while GREaT collects the voluntary donations from the industry to fund research, education and treatment projects selected and monitored by the RGF.

86. The boundaries between the elements of the tripartite structure have never been clear. GREaT has distributed funds for treatment directly to GamCare (which runs a helpline and therapy services and trains the industry workforce in prevention) and the Gordon Moody Association (which provides residential treatment). The RGF has received money from the industry through GREaT to distribute to other organisations under the guidance of the RGSB: for example, the National Problem Gambling Clinic, run by the NHS, received funding from RGF. GREaT, RGF and RGSB were thus intended to work together to fund and plan research, education and treatment provision.

87. The cost-effectiveness of the tripartite structure was called into question by its fundraising wing, GREaT. It argued that the predecessor body, the Responsibility in Gambling Trust, was able to do the same job for less money: for example, while the Responsibility in Gambling Trust estimated that it cost £474,000 for it to raise £5 million per annum from the industry the "like for like" figure for RGF and GREaT combined was £500,000.[110]

88. The tripartite structure drew criticism from all sides of the debate, largely because it was seen by many as overly bureaucratic, and because of the discord between GREaT and RGF.[111] RGF described industry funding levels as "lower than hoped" and, as a result, said: "some aspects of RGSB's Strategy cannot yet be addressed. There is little flexibility within the budget for 2011/12 for RGF to review the proportion of funding to each area of activity".[112] The RGF went so far as to advise that a statutory levy should be enacted unless a funding distribution method could be put in place to prevent the views of industry or service providers from dominating the process.[113] GREaT, meanwhile, stated that the tripartite structure had had a "negative impact on" its ability to raise funds, and raised concerns about the poor relationship between RGF and the treatment provider GamCare.[114]

89. Shortly after providing their written evidence to us, RGF and GREaT terminated their funding agreement, effective since March 2012, as a result of a dispute over the issue of independence from the industry. RGF objected to GREaT's view that the voluntary nature of the industry's contributions should mean that it was "fully involved in the decision making process" concerning grant making.[115] The tripartite structure has therefore in effect collapsed. RGF blamed "insufficient will and determination on the part of those who signed up to" the tripartite agreement for its failure to succeed.[116]

90. In November 2011, the Responsible Gambling Strategy Board (RGSB) released its third annual strategy document detailing its objectives and setting out its recommendations, to the Gambling Commission and the Government, for the principles which it believes should apply to successor arrangements in the wake of the withdrawal of RGF. As the RGSB itself has stated, it is not yet clear what structure will replace the function of the RGF. The main principles outlined by the RGSB include:

— Ensure impartiality of funding decisions

— Command the confidence of stakeholders in setting priorities

— Secure credible, independent research into which treatment strategies work and include research, education and treatment in a coherent strategy

— Deliver proper accountability for use of funds provided, by using the grant management, commissioning and data collection frameworks already established by RGF, and

— Ensure continuity of funding at the target income levels set by the voluntary agreement.[117]

91. We recommend that, in designing successor arrangements to the tripartite agreement for the funding of research, education and treatment, the Department for Culture, Media and Sport and the Gambling Commission focus on minimising overlap between the responsibilities and activities of the bodies involved as well as ensuring effective communication between them. While the Responsible Gambling Strategy Board continues to advise the Gambling Commission, and through it the Government, we believe that the Department for Culture, Media and Sport should also take a more pro-active role in identifying the research needed for strategic policy development and ensuring that these needs are reflected in the research being carried out.

92. We support the recommendations of the Responsible Gambling Strategy Board for the principles which should apply to the successor arrangements to the tripartite agreement as laid out in its 2011 Strategy document. In addition, the advice from the Responsible Gambling Strategy Board regarding the amount required for future research, education and treatment, if accepted, must be clearly communicated to the gambling industry. This advice should set out how the money donated by the industry will be spent. We await with interest proposals from the Gambling Commission for a replacement for the now defunct system for funding and commissioning research, education and treatment programmes.

DISTRIBUTION OF FUNDS

93. As the dispute between the RGF and GREaT Foundation indicates, not everyone was happy about how the funds raised from the industry were distributed. GamCare said that the funding provided through GREaT had been "focused on treatment [and that] very little has been spent on prevention and education. The remainder has been invested in research".[118] The Casino Operators Association—describing the tripartite structure as "overly-expensive, self-serving and unnecessary"—recommended that it be abolished, allowing the industry to give directly to organisations like GamCare and the Gordon Moody Association.[119] The Evangelical Alliance argued that education funding could be at risk under the current system due to funding being channelled by the industry towards research.[120]

94. Education and research have been, to an extent, the poor relation of treatment. Levels of understanding among the general public about gambling, probability and odds are low, particularly among under-16s. This situation has the potential to contribute to problem and excessive gambling as people could have unrealistic expectations about their chances of winning. Some witnesses suggested that the gambling industry was unwilling to see its donations going towards educational programmes because it feared reputational damage.[121] GamCare suggested that education was needed in schools because "the promotion of gambling products has become more pervasive, and so the teenager's perception of gambling as an acceptable leisure pursuit is being reinforced with no effort to ensure they are equipped to gamble safely".[122] GamCare told us that it had developed an education programme aimed at 12 to 16 year olds which it intended to pilot in three areas if funding of about £75,000 per pilot was made available through GREaT over two years.[123]

95. Some funding for research into gambling came from the Government, with the intention that a sound base of knowledge would be developed to allow evidence-based policy making. The Government funded the previous National Centre for Social Research surveys into gambling. As noted above, we are disappointed that the Government has withdrawn funding from future surveys without having indicated how it intends to ensure the provision of up-to-date and robust data on problem gambling in future.

96. The Gambling Commission should make an assessment of the available gambling education programmes aimed at under 16 year olds—including that which has been developed by GamCare—and make a recommendation on their merits, based on projected cost and level of impact.

10 Ev 178, Ev 152, Ev 158, Ev 180, Ev W 44, Ev W 32, Ev W 01, and Ev W 52 Back

11 Ev W 06 Back

12 Ev 180 Back

13 Ev W 01 and Ev 178 Back

14 Ev 180 Back

15 Ev 161 and Ev 167 Back

16 Ev 161 Back

17 Ev 193 Back

18 Gambling Review Report p94 Back

19 HC Deb, 1 November 2004, cols.31-32. Back

20 Ev 227 (Bingo Association); see also Ev 06 (Gala Coral Group), Ev 161, and Ev 186 Back

21 See Annex 2 for a description of the methodology and an estimate of the robustness of this survey. Back