UK casino regulation: time to right some wrongs

January 30, 2012 by Roy Ramm of the National Casino Industry Forum

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The British coalition government has a growth agenda. It regards tourism and leisure as central to that agenda. Its predecessor Labour administration was also ‘pro-growth’: how could it not be? So why it is that successive British governments are bent on ignoring the contribution the casino industry can make?
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In the run-up to the 2007 British General Election the passage of the long-awaited Gambling Act 2005 was politically bruising for the then Labour government. In the Westminster parliament genuine and informed interest in the Gambling Act from the opposition parties was thin on the ground. 

In the parliamentary arena - the pinnacle of the British adversarial system of government - the Gambling Act became less a piece of legislation to be debated and more the then Conservative, opposition’s blunt weapon of choice with which to beat the government. The right wing media joined the fray. Debate turned to debacle. Those of us in the industry who had worked hard to see the 40-year-old legislation (The Gaming Act 1968) modernised could only look on in horror as the political conflict escalated and the reportage became more damaging.

By the time the Act passed into law in September 2007 it had had great and important lumps knocked off it and ugly warts attached. It was already on life support when the pre-election ‘wash-up’ procedure (the brief and cynical process which saw the Act onto the statute books in the minutes before parliament was dissolved) proved no substitute for the usual deliberative law-making mechanism. 

No surprise then that the Act was almost immediately proven to be badly flawed and unfit for purpose. What should have been a liberal, modernising piece of legislation that struck an effective balance between protecting the individual and allowing legitimate commercial expansion of the industry ended up as a legislative dead camel: an Act designed by a committee, then butchered. 

Instead of allowing local people and the market to decide about casino numbers and locations, but still anxious to the point of paranoia to distance itself from any decision, the government appointed a Casino Advisory Panel to recommend the locations of 16 new ‘experimental casinos’. Initially it was 17, including a decent sized resort casino, but that was way too much like fun for the new Prime Minister, so he ditched that on his first day in office! And there is of course nothing whatsoever ‘experimental’ about them!

Less than a handful of 16 new licences have been issued. Just one ‘2005 Act casino’ has been built and is due to open in Q4 2012; the next development is a least another two years away. Most of the small licences don’t make any economic sense and will go yellow, turn up at the corners and lay unopened in a drawer, never to be taken up.  

The licensing process is Byzantine and monumentally expensive – the process in the London Borough of Newham is believed to have cost the local authority well over £1m to administer. The consumer offer across all casinos, large, small and 1968 Act converted licences is confusing and unfair. The market is grossly distorted. Regulation is burdensome and customer protection measures are inconsistent with the associated risks.  

Jeremy Hunt, the Secretary of State for Culture Media and Sport, the lead department on gambling, said as much to the parliamentary Select Committee in April this year. The following exchange between Hunt and John Whittingdale, the chairman of the committee, is revealing.

Whittingdale asked: “In the six years since the [Gambling] Act has been passed not a single new licence has been granted… Do you not think that this Act has been a complete fiasco?” 

Hunt replied: “It hasn’t worked – you’re absolutely right. There has been a whole series of problems with it.” Despite most people - including many of the civil servants and regulators administering the Act – agreeing with the Secretary of State and acknowledging that the Act is a fiasco, there has been no appetite to address its failings. The National Casino Industry Forum, the UK’s casino industry leading trade body, has presented volumes of evidence and offered numerous solutions. But the battle of autumn 2007 remains clear in the political memory. 

The toxicity of the Gambling Act 2005 and the general lack of electoral capital in gaming legislation remain. Even though there has been no opposition from any quarter and there is considerable cross-party support for change, that’s where political interest in revisiting the Gambling Act 2005 has ended - until now.

The Department of Culture Media and Sport Select Committee has decided to examine the Gambling Act. Though Select Committees have no power - they don’t make law and can’t direct the government - they have increasing persuasive power and influence.

The Select Committee system works like this. There is a Commons Select Committee for each government department, examining three aspects: spending, policies and administration.

These departmental committees have a minimum of 11 members, who decide upon the line of inquiry and then gather written and oral evidence. Findings are reported to the Commons, printed and published on the Parliament website. The government then usually has 60 days to reply to the committee's recommendations. Though the committees only have the power to ‘recommend’, any doubt there may have been about the influence and effectiveness of the Select Committee system has been well and truly put to rest by MP John Whittingdale’s DCMS Select Committee investigations in what has  been dubbed ‘Hacking Gate’.

Over the last few months DCMS Select Committee members have ripped into politicians, police chiefs and media moguls summoned to appear in person and to account for their actions in the Committee’s inquiry into the allegations of telephone hacking by journalists from the News of the World.

The inquiry hasn’t yet concluded and its report is yet to be written, but already jobs have been lost (notably those of Andy Coulson, the Prime Minister’s director of communications, Rebekah Brooks, the chief executive of News International, and two of Scotland Yard’s most senior officers, including the Commissioner) and nothing will ever be quite the same again in the relationship between the media, the organs of the state and politicians. 

Now the DCMS Committee is examining the Gambling Act 2005 with the same forensic acuity. Along with dozens of other interested parties, including gaming companies, academics, trade associations, faith groups and the industry regulator, the NCiF has submitted, written and given oral evidence to the committee articulating its case for change. Once written evidence has been submitted it is considered the property of the committee and should not be repeated prior to the committee concluding its deliberations. However, the evidence the NCiF submitted was in support of its long published objectives and is well and truly in the public arena. 

Briefly, the NCiF continues to argue for: a harmonised casino industry in the UK with all casino operators being given equal and fair access to gaming products; the power to determine where existing casinos operate to be devolved from Westminster to local authorities; modernisation of the industry to allow better access to electronic and online gaming products and some fair and flexible mechanism to determine stakes and prizes. Remarkably uncontroversial; thus far remarkably illusive.

If the NCiF’s case is successful before the Select Committee and recommendations for change to the laws governing casinos are made, legislative time has to be found. However, the NCiF has anticipated that concern and has proposed changes that can be achieved through Statutory Instruments. This is a relatively quick and easy mechanism for making routine changes to the law. But DCMS ministers have still to find the opportunity to pass any primary legislation that may be required in the always – at least as far as gambling legislation is concerned - crowded parliamentary time table! An opportunity is now on the horizon.

In July, following an announcement from the DCMS, the media reported ‘a crackdown on offshore gambling companies that operate in the UK’. Though a DCMS announcement, it is expected that any proposed changes will have also been discussed with the Treasury and tax changes will also quickly follow. A Treasury spokesman said: "We are aware of the DCMS' statement and are considering it. We will make a statement in due course."

On July 14, 2011, John Penrose MP, Jeremy Hunt’s number two at the DCMS and the closest thing the UK has to a ‘Gambling Minister’, issued a written ministerial statement, which said the Gambling Act should be changed so "remote gambling" is regulated according to where bets are placed rather than the operator’s location. Under the revamp, every company offering bets to British customers or advertising in the UK would be required to hold a Gambling Commission licence, although there was little detail in the statement and no indication of timetable.

Penrose said: "These proposals are an important measure to help address concerns about problem gambling and to bridge a regulatory gap by ensuring British consumers enjoy consistent standards of protection, no matter which online gambling site they visit."

In some ways NCiF members care less about the content of these proposals than the fact that the new licensing system might require a change in primary legislation, but the move would unquestionably require the Minister to address at least one of the NCiF’s policy objectives. 

Currently, in the offline world, real casino table games and higher value slots (Category B1) can only be played in casinos. However, similar and sometimes higher value games played online are not available in casinos as an operator offered option. While it is lawful for a customer in a UK casino to use their own computer to play on an online gambling site or, irritatingly from an operator’s perspective, one supplied by the operator as an amenity for general internet use, it is illegal for a licensed UK operator to offer or promote their own (or any other) online gaming inside a licensed and regulated casino. 

So, a UK operator can promote an online casino outside a casino – pretty well anywhere – but that same operator can’t do so inside a UK casino. If it is serious about customers enjoying a consistent standard of protection, it would be compounding the anomalies in the 2005 Act if the government failed to address the issue of online gaming in a UK casino when it tackles licensing.

So after almost four years, through a combination of an independent cross-party parliamentary inquiry and the march of online commerce, the government has been dragged, it has to be said somewhat unwillingly, back to into the arena of gambling legislation. So is there cause for optimism?

In his very well received pre-election paper on regulation, ‘Regulation in the Post Bureaucratic Age’, John Penrose displays the best kind of deregulatory DNA that the NCiF could hope for. He criticised the Labour government of the day for responding too quickly to media stories and announcing new regulations in order to be seen ‘to be doing something’. He is right. That is precisely what happened to the UK casino gaming industry. But, it was Blair not betting that was the target of the attacks during the last administration and the government now has nothing to fear from the newly chastened media when bringing forward positive legislative change for the UK gaming industry. 

Penrose was also critical of the failure to factor in human nature and lambasted what he calls ‘ineffective and clunking interventions’. Again, the NCiF agrees; you can’t get much clunkier than three types of casinos and seven categories of gaming machine. Or can you? In the last few weeks Penrose has announced that a long-awaited review of stakes and prizes will commence in December 2011 and will take 18 months! 

Privately, officials have said don’t expect any change for two years. That means it will be 2014 before the casino industry has enjoyed an increase in stakes and prizes. That raises ‘clunkiness’ to a whole new level on Mr Penrose’s watch! (Just in case you are worried that the government in Whitehall had lost the recipe for gaming legislation, they haven’t: they managed to cook up two tax increases in the same period.)

Finally, the Minister in his excellent paper criticises the failure to decentralise and to take power away from Westminster. Big tick from us! Preventing local authorities from deciding for themselves whether they want casinos in their area by retaining that power in Westminster is a classic example. I repeat ‘casinos’, not nuclear power stations, germ warfare research establishments or maximum security jails - ‘casinos’ where 18 million visits were made last year by people enjoying themselves are controlled by Westminster. Why?

It is disappointing that successive governments have been so reluctant to address gambling as a mainstream leisure activity and integral to a growth agenda. The DCMS website still only gives the industry any kind of a mention when it is ‘clamping down’ or ‘closing a loophole’; even the department’s name ignores its most revenue generative section in its eclectic portfolio, but now the NCiF hopes that the political cover that ought to be provided by the Select Committee and the legislative opportunity to revisit the Gambling Act will encourage Mr Penrose to put his legislation where he claims his convictions are. 

About the author…

Roy Ramm is the compliance and risk director of London Clubs International. He has been a casino industry executive for 15 years. He is responsible for LCI's licensing and regulatory compliance in the UK, South Africa and the Middle East. He has wide international industry regulatory experience. He is also the co-chair of the National Casino Industry Forum's Operations Forum and helped establish NCiF in 2009. Before joining the gaming industry, he served for 27 years in the Metropolitan Police at Scotland Yard.

This article was first published in the winter 2012 edition of European Gaming Lawyer.

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