Gambling Act 2005 (Gaming Machines in Adult Gaming Centres and Bingo Premises) Order 2011

Baroness Rawlings Excerpts

Tuesday 5th July 2011 Grand Committee

Moved By

[Baroness Rawlings]

That the Grand Committee do report to the House that it has considered the Gambling Act 2005 (Gaming Machines in Adult Gaming Centres and Bingo Premises) Order 2011.

Relevant document: 23rd Report from the Joint Committee on Statutory Instruments.

[Baroness Rawlings]

My Lords, the legislation we are debating this evening concerns category B3 gaming machines. These are slot machines which currently allow a maximum stake of £1 and a maximum prize limit of £500. They are most commonly found in adult gaming centres – which are more frequently referred to as “AGCs” – and bingo premises. Under the provisions of the Gambling Act, a maximum of four of these machines can be offered by an AGC, while bingo premises may offer a maximum of eight.

The Categories of Gaming Machine (Amendment) Regulations 2011 will increase the stake limit for B3 machines—that is, the maximum amount that can be staked on a single game—from £1 to £2, while the Gambling Act 2005 (Gaming Machines in Adult Gaming Centres and Bingo Premises) Order 2011 will vary the maximum number of these machines that AGCs and bingo clubs can offer customers to 20 per cent of the total number of gaming machines available for use on an individual premises.

The changes have been requested by the amusement and bingo industries. The AGCs and bingo clubs have been struggling for some years with difficult trading conditions arising from the economic downturn. These difficult trading conditions are also affecting other related sectors, in particular British gaming machine manufacturers and suppliers. The British Amusement Catering Trade Association—which represents the majority of the AGCs and gaming machine manufacturers in Britain—estimates that revenues across the industry are now down some 36 per cent since 2007, with over 250 arcades and 1,300 jobs lost. BACTA also estimates that gaming machine manufacturing output has dropped by 40 per cent since 2006, with employment in the sector down by 33 per cent during 2009. Alongside this, figures produced by the Bingo Association show that 128 clubs have closed since 2006, with gross gaming sales having fallen by some £900 million since 2008-09 and employment down by nearly 30 per cent since 2006.

Category B3 gaming machines are an intrinsic part of the business model for AGCs and bingo clubs. They are very popular with adult players and generate significant levels of revenue for these businesses. These changes will allow them to adapt and develop their business model to meet the challenges of the current economic climate.

Amusement arcades and bingo halls are some of the oldest tourism and leisure businesses in Britain and occupy unique roles in the leisure industry. The AGCs in Britain employ nearly 20,000 people. They are often a vital part of many seaside towns, where they form an integral part of the local tourism offer and are significant employers not only in terms of individual premises but also in supporting businesses involved in manufacturing, supply and maintenance.

Bingo clubs also form a significant part of local economies in terms of employment. The industry employs some 17,000 people. But they also play a wider role. Some 3 million people in Britain play bingo, and bingo clubs very often provide a valuable social amenity. They fulfil an important social function in many communities, especially for older and retired people—older women in particular.

However, gambling is different to other industries. For the overwhelming majority of people in Britain, gambling is a pastime, and does not present any problems, but for a tiny minority of people it is a darker business. The 2010 gambling prevalence survey showed that problem gambling levels in Britain had increased from 0.6 per cent to 0.9 per cent of the adult population over the last three years. That is nearly half a million people. This risk is why gambling in Britain is carefully regulated. In the case of gaming machines, a robust regulatory framework is in place. There is a comprehensive licensing system for operators, manufacturers and suppliers; and stringent rules covering access, supervision, and the technical standards of the machines. Regulations also strictly control the amount that customers can stake and win, and the numbers and types of machines gambling premises businesses can offer.

This regulation works. Britain has very low rates of problem gambling compared to other jurisdictions. However, as a consequence operators face restrictions around the types of commercial decisions they have to take to maintain and grow their businesses. They are unable to adjust product pricing to absorb increasing costs, and as machine numbers are set centrally, they are limited in how they can respond to demand and tailor their offer to meet local circumstances. Amusement and bingo industries have therefore asked the Government to change the rules around category B gaming machines to allow the stakes permitted to be raised and the incidence of such machines increased.

Following a public consultation, the Government are persuaded that the situation facing AGCs and bingo clubs is sufficiently grave to justify a recalibration of the stake limits and entitlements for B3 machines. By bringing forward these measures the Government want to give greater flexibility to these businesses to make the necessary commercial decisions about the products they offer customers for B3 gaming machines in Britain—both through new machines and new game formats, thereby offering a boost to the manufacture and supply sectors.

The Government would like these businesses to thrive, but not at any cost. I referred earlier to the level of problem gambling in Britain and I want to make it clear that protection of the public—especially young and vulnerable people—will remain paramount. A public consultation on these measures closed in January, and a wide range of views for and against was expressed. The Government have taken notice of these views and are confident that these matters do not present a risk to problem gambling. They balance meeting the needs of business with protection of the public. The fact is that what research there is about the impact of gaming machines on problem gambling is inconclusive. There is no clear evidence—further research is continuing; but it will take time to bear fruit, and in the mean time businesses are suffering and jobs are being lost.

Let us bear it in mind that the 2010 prevalence survey showed that participation in slot machines has decreased since 2007 from 14 per cent to 13 per cent. Based on the available evidence, the Government do not see B3 gaming machines as a risk to the public. In fact, the current regulations have led to unintended consequences: such is the demand for B3 machines from customers in AGCs and bingo clubs that operators have often resorted to splitting their premises artificially in order to meet this demand. This is not conducive to effective regulation.

The measures we are debating this evening are not simply about allowing operators to install more machines and charge more for their use. They should stimulate demand for new B3 game formats and new machines across the amusement and bingo industries, thus offering a timely boost to manufacturers and suppliers as operators look to refresh their offer. Operators will be able to respond to customer demand without having to play fast and loose with the regulations by artificially splitting their premises.

The Government estimate these measures should see an injection of up to 3,000 new B3 machines into the market as operators take advantage of more flexible machine entitlements. This could see an increase in revenues of £8.5 million a year across these industries. This is a modest amount, but it will offer security for social and economic assets in local areas and protect jobs. It will make the difference in keeping smaller bingo clubs open and provide a potential lifeline to many small family-run arcades, particularly in seaside towns, which are struggling in the current economic climate.

Finally, the Government are committed to removing unnecessary red tape and barriers to create the conditions for growth in the leisure economies. Consequently, these measures are a minor adjustment to the regulatory framework put in place by the Gambling Act. They are not about promoting gambling; they are about providing long overdue help to many tourism and leisure businesses. We want amusement arcades and bingo clubs to remain competitive in these tough economic times. These are some of the oldest tourism and leisure businesses in Britain, employing between them some 37,000 people. They are important elements of many local economies, particularly in seaside towns, as I said. We want them to thrive. I commend the regulations and the order to the Committee.

--- Later in debate ---

[Baroness Rawlings]

My Lords, this has been a very helpful debate and I thank all noble Lords who have spoken. I thank my noble friend Lord Clement-Jones for his support, and I will try and answer his three questions. The first was regarding a regular review, which the noble Lord, Lord Stevenson, also wanted to know about. We would like a more systematic approach to be in place, and we are minded to return to a triennial review system, as the noble Lord, Lord Clement-Jones, mentioned. We hope to develop this area with the industry and the Gambling Commission, and to explore how it might work. There are no plans for the moment to make changes to stake and prize limits for B2 machines.

The noble Lord’s second question was regarding other establishments. The Government have made clear their commitment to the British amusement industry to deliver these measures. The Minister for Tourism is meeting Rileys Clubs Ltd tomorrow, Wednesday 6 July, to discuss this issue, and it would be wrong to pre-empt that meeting.

On the noble Lord’s third question, also mentioned by the noble Lord, Lord Stevenson, the Gambling Commission originally favoured an approach based upon floor space. The Government took these views into account but felt, on balance, that the 20 per cent formula would be better placed to meet the needs of both the AGCs and bingo clubs, plus, it would offer a real boost to the machine manufacturers.

My noble friend Lord Moynihan is very knowledgeable in this area, because I believe he took through the previous Bill. I totally agree with him regarding the seaside resorts and that the Prime Minister supported this at a very early stage. As to the estimate of the economic benefit set out in the impact assessment, the impact assessment was considered by the independent regulatory policy committee and was assessed as being a reasonable estimate of impact. We therefore believe that it is an accurate estimate.

The noble Lord asked whether the new generation of machines would take the £2 coin. Yes, they will.

I am sorry that the noble Lord, Lord Stevenson, has never tried slot machines, because they are rather fun for a flutter, but perhaps your Lordships' House is not quite the right place to have them.

[Lord Stevenson of Balmacara]

I mentioned it only because the age profile and ambience here seemed so appropriate.

[Baroness Rawlings]

Oh, well. Perhaps that is another place and another time.

The noble Lord asked a more serious question about tax, which of course is a matter for the Treasury. Decisions on the eventual rates and thresholds for a new duty will be made by the Chancellor in the 2012 Budget. The Treasury has launched a consultation on the design characteristics of the new duty. We would urge all interested parties to engage as fully as possible with the Treasury on this matter. I am aware of the industry’s concern about any additional tax burdens and have made my Treasury colleagues aware of the industry’s difficult economic situation and the need to minimise burdens on operators.

This has been a very constructive debate. I thank all noble Lords who have contributed. I commend the order to the Committee.

Motion agreed.