Categories of Gaming Machine (Amendment) Regulations 2014

Lord Bates Excerpts

Tuesday 12th November 2013 Grand Committee

Moved by

[Lord Bates]

That the Grand Committee do report to the House that it has considered the Categories of Gaming Machine (Amendment) Regulations 2014.

Relevant document: 10th Report from the Joint Committee on Statutory Instruments.

[Lord Bates (Con)]

My Lords, these regulations are intended to increase existing stake and prize limits for some, but not all, categories of gaming machine. Gaming machines are an important source of revenue for many sectors of the gambling and leisure industries, and these measures will provide support for businesses which continue to experience difficult trading conditions.

The challenges faced by individual sectors, including family entertainment centres, bingo clubs and pubs, have had a marked effect on gaming machine manufacturing and supply businesses. According to the Gambling Commission, the total number of machines in the regulated industry fell by around 10% between 2010 and 2012. The Government consulted earlier this year on proposals to increase stake and prize limits for some categories of gaming machine. The Government received many representations in support of their proposals and remain confident that increases will not risk the licensing objectives in the Gambling Act, which rightly include the protection of children and vulnerable adults from being harmed or exploited by gambling. In fact, the Government have secured commitments from the gambling industry to develop, trial and implement strengthened player protection measures to help to build and maintain the public confidence necessary to accommodate the increased stake and prize limits. Such measures are particularly relevant to the casino industry, where gaming machines offer significantly higher prizes than other sectors of the industry.

Increases to stake and prize limits vary depending on the category of machine and the premises in which they are located. The level of increase is highest in casinos, which represent an appropriate venue for high stake and prize gambling given the stringent regulatory controls they are required to uphold. The new limits provide greater consistency with the level of gambling that is expected to take place in a casino and will stimulate capital investment in the industry, allowing it to compete more effectively internationally.

For machines found in clubs and pubs, the level of increase is lower. The Government are persuaded that these increases will provide support to businesses while remaining consistent with the licensing objectives. The Government propose to maintain stake and prize limits for all types of machine found in seaside arcades and travelling fairs, with the exception of penny-fall machines, where a small increase is proposed. This will minimise any potential risk to public protection from gaming machines accessible to children.

These regulations have been considered by the Secondary Legislation Scrutiny Committee, and I am grateful for its contribution. The committee quite rightly identified the importance of minimising problem gambling, particularly in the context of young people, and requested the Government to keep this issue under close review alongside their efforts to help the gambling industry.

I assure noble Lords that the Government closely monitor the problem of gambling and welcome the contribution of the Responsible Gambling Strategy Board and the Responsible Gambling Trust, working with the industry to strengthen existing mechanisms to monitor the impact of gaming machines, stake and prize limits both economically and socially.

Overall, although it is an important growth measure for many struggling businesses, I believe that this package of measures strikes the necessary balance between creating the conditions for industry growth and maintaining the licensing objectives which underpin the Gambling Act 2005, and I commend the regulations to the Committee.

[Baroness Jones of Whitchurch (Lab)]

My Lords, I am grateful to the Minister for his explanation of the changes. I am also extremely grateful to the Secondary Legislation Scrutiny Committee, which has taken such an interest in these proposals and raised many of the questions that I might otherwise have asked.

First, I make clear that I welcome the decision to have a triennial review. It is obviously useful to keep stakes and prizes under review in a structured and timely manner, so that is a useful development.

Secondly, however, I share the concern of many who responded to the consultation, as well as the Scrutiny Committee, that the research evidence on the effects of those forms of gambling on poverty and addiction is so sparse. Given that we are dealing with important aspects of social policy, it is not good enough to argue that because something is unproven, we should carry on as before. Surely, the onus should be on the industry to prove that there is no causal link between the use of gambling machines and addiction before asking us to increase the stakes, and therefore their profits. Is the Minister happy that sufficient research is taking place? If not, what further steps do the Government have in mind to deliver substantive and compelling evidence on these issues? Thirdly, I believe that it is important to have a wider cost-benefit analysis on the impact of those changes than simply measuring the economic advantages of jobs in the sector.

In answer to a question by the Scrutiny Committee on the potential public sector impact on young and vulnerable people who are harmed by gambling, the Government replied that public protection will be secured if the industry delivers on its social responsibility and player protection commitments. However, it is not clear what mechanisms the Government have in place to secure those commitments from the sector. Surely, the evidence so far is of an industry reluctant to act against its own interests in maximising player participation and therefore potential profits. What levers do the Government intend to use to hold the industry to account on social responsibility and player protection?

Turning to the specific proposals in the regulations, I first ask the Minister about the increased stakes proposed for category D coin-pusher or penny-fall machines. I accept that the increase is small and that the impact may be minimal, but what justification is there for encouraging children and young people to gamble at an early age, given the acknowledged link between early gambling and problem gambling later? In reply to the Scrutiny Committee, the Government say that coin-pushers are generally played for amusement and are provided in a family environment. Although that may be true, is it not also true that those machines are usually sited next to other gambling machines that children might then also be tempted to play? A renewed attraction to those relatively small-scale machines cannot be seen in isolation if it is encouraging a more general gambling habit. Why is it necessary to take an added risk when there is a known connection between early gambling and problem gambling?

Finally, I would like to discuss the major concerns over B2 fixed-odds betting terminals. The Minister will know that there is increasing evidence of the harm that those machines are having on individuals and local communities through the proliferation of high-street betting shops, which are increasingly reliant on the profit from those machines. These machines are the source of some of the worst examples of gambling addiction. It is possible to lose up to £100 every 20 seconds, which is £18,000 an hour. The speed of play is faster than a roulette table, and it can happen without any staff contact or intervention. Meanwhile bookmakers containing these machines are being clustered in some of the poorest high streets in Britain, and local authorities have limited control over their expansion as in planning law they are classified in the same class as banks and building societies.

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[Lord Moynihan (Con)]

My Lords, I welcome this order and echo many of the concerns mentioned by the noble Baroness with regard to the social protections we need to have in place for young and vulnerable people. But this is a regulated sector in which job losses, business closures and competition with jurisdiction overseas are to be found on virtually every page of the Explanatory Memorandum. Two hundred and ninety arcades have closed since 2009-10, with 900 jobs lost. These arcades are part of the character of so many of our traditional seaside resorts, and we should do everything we can to keep them competitive.

My principal reason for intervening on this order is because of the importance of consultation with sports clubs, which are mentioned in this document. I hope that sports clubs have welcomed this order, and I will be interested to hear what the Minister has to say on that subject. Sports clubs’ major task is to retain members and increase participation. Substantial investment is needed in sports clubs so that they stay competitive and attractive, whether by floodlighting their premises, segregating their changing rooms or upgrading their facilities—three items on which the noble Baroness, Lady Billingham, has always been eloquent and occasionally vociferous. Today, I am sure she will agree with me that licensed gaming machines, properly controlled, are an important source of income for some of our sports clubs, and we need to provide interest in those machines and demand for them from the membership. For that reason, it is important for sports club to view this order, see the changes that are being made and, I hope, welcome them. As I understand it, sports club machines come in category B4, or possibly B3A—the Minister will correct me if I am wrong. The proposal is to increase the minimum stake from £1 to £2 for those machines, and potentially the prize money from £250 to a maximum £400, to make it more attractive to players and, in turn, to generate more income for the sports clubs.

The noble Baroness rightly mentioned, and I echo her comments, due social protections should be put in place, with proper regulation in the clubs and protection of young and vulnerable people. With that, it would be right to support the order and recognise that both sport and sports clubs will benefit, in a difficult economic environment. Ultimately, I hope that we will see the goals that many of us who will participate in the next debate, albeit briefly, will want to see on the record—namely, an increase in participation in sport in this country, which can best be delivered by the clubs, which are there in the interests of their membership.

[Lord Bates]

My Lords, I am grateful to noble Lords who have spoken, who have in many ways captured the extent of the debate—the economic problems being faced by many sports clubs and other commercial enterprises around the country and, at the same time, a natural and right concern, which the Government share, about protecting vulnerable adults from exploitation.

The noble Baroness, Lady Jones, asked a number of specific questions, and I want to give them an appropriate response as best as I am able. But to respond quickly to my noble friend Lord Moynihan, who talked about the importance of gaming machines as a revenue stream for sports clubs and other private members’ clubs, that is correct. In the category of machines that will be found there are the B4 machines to which he referred, as well as the B3A and C machines. The clubs observe the Gambling Commission’s guidance and codes of practice to ensure effective social responsibility arrangements are in place.

The noble Baroness asked about research into the effects of gambling. I reassure her that work is already under way to advance our understanding about gaming machines and their impact. The Responsible Gambling Strategy Board, an independent expert advisory body, is working to develop a strategy which will review the impact of regulatory change and any associated changes in gambling behaviour, while the Responsible Gambling Trust is carrying out research which aims to better understand how people behave when playing gaming machines and what will help people to play responsibly. Again, in the context of this, it is important to realise that one reason for the decline is the growth of online gambling, which has no regulation or supervision at all. So drawing people to enjoying this form of leisure in a reasonable way in regulated areas would seem to help towards that. The work being carried out will further our understanding of the social impact of regulatory change and allow for the wider cost-benefit analysis on the impact of these changes to which the noble Baroness refers.

The noble Baroness asked about the justification for intervention and said that there should be an onus on the industry to justify proposals for stake and prize increases. The Government agree with that approach and are satisfied that sufficient evidence has been put forward by the industry to justify the stake and prize limits that the regulation proposes.

On strengthening player protections, the Government have consulted extensively and invited representations about research as part of the review. I should say to my noble friend Lord Moynihan that there were many representations and responses to the consultation received from sports clubs to this, and they were broadly in favour of the measures being put forward for the reasons that he has outlined. The Government have received advice from the Gambling Commission and the Responsible Gambling Strategy Board, and there is scope to increase the stake and prize limits for some categories of gaming machine, provided that the industry makes progress in strengthening player protection. It has twin sides; as the industry gets better at providing protection, it may be possible to consider further changes to the limits. That is the right way in which to proceed.

The noble Baroness, Lady Jones, referred to the risks to children, particularly from the increases in stake and prize limits to penny falls and coin pushers. The Government share the view that a cautious approach should be taken to products accessible by children. It is for these reasons that the Government have rejected the proposals from the industry to increase the stake and prize limits for reel-based gaming machines accessible to children and all other category D machines, with the exception of coin pushers.

The noble Baroness also referred to fixed-odds betting terminals, the so-called category B2 gaming machines. As part of the review, the Government sought quantifiable evidence on the impact of a reduction in stake and prize limits for these machines. However, the evidence received was inconclusive and the Government have been advised by the Gambling Commission and the Responsible Gambling Strategy Board that a precautionary reduction in stake and prize limits is currently unsupported by the available evidence. Despite this, the Government remain concerned about these machines and their potential association with an elevated risk of gambling-related harm. The Government have therefore made it clear that they will consider the future of the B2 machine to be unresolved. As the noble Baroness noted, the Prime Minister confirmed the Government’s commitment to monitor these machines to ensure a fair and decent approach that prevents problem gambling, and that is exactly the course of action that the Government are taking here.

As to the £18,000 per hour loss rate sometimes cited for B2 machines, this is astronomically improbable, one might say. It is an extreme calculation. However, the Government have acknowledged that it is quite possible to lose or win several thousand pounds within an hour within a normal range of behaviour on a machine. It is for these reasons that the measures I have outlined are so important and why the Government consider the future of these machines to be unresolved.

On betting-shop clustering on high streets, to which the noble Baroness referred, the Department for Culture, Media and Sport is in regular discussion with DCLG Ministers about the issue. I can certainly reassure noble Lords that these discussions will continue and that evidence will be monitored.

The Government are satisfied that the measures that we are debating today will bring benefits to businesses and sports clubs through much needed revenue and will allow consumers to enjoy a broader range of products in a responsible way. On the basis that the industry has committed to enhance its social responsibility measures and that work is under way to allow for proper assessment of the impact of these regulations, I am confident that the risk to problem gamblers and vulnerable people is minimal.

[Baroness Jones of Whitchurch]

Perhaps I may briefly prompt the Minister on the B2 issue, an area in which there is an agreed level of concern. He said that the Government’s view was unresolved and that the issue would continue to be under review. It would be helpful if the Minister could give a little more detail of how a resolution will be reached. What timetable and mechanism do the Government have in mind for digging into this issue, analysing it and bringing forward a new resolution?

The only other point I wish to make is that if you rely on the industry to come forward with evidence to show that there is not any harm, you will wait a long time. Somehow such evidence has to be found from other sources.

[Lord Bates]

That is correct. The noble Baroness has put her finger on a key point. However, it is an incentive for the industry. If it wants to see prize and stake limits increased in the future, it will have to collate such evidence and come forward with it. On her specific point, work is under way to rapidly improve our understanding of these machines. The Responsible Gambling Strategy Board is due to produce a report in autumn 2014, which will be before the next triennial review. I hope that that reassures the noble Baroness.

Motion agreed.