Gambling (Categorisation and Use of B2 Gaming Machines) Bill [HL]

Lord Clement-Jones Excerpts

Friday 11th March 2016 Lords Chamber

Moved by

[Lord Clement-Jones]

That the Bill be now read a second time.

[Lord Clement-Jones (LD)]

My Lords, through the Bill I am today pursuing a matter of considerable concern that has been raised in this House on a number of previous occasions by myself and my noble friends in particular, and which reflects great concern outside in the country.

Fixed-odds betting terminals—FOBTs—are touch-screen roulette machines in betting shops that allow the user to bet up to £100 every 20-second spin. They have transformed the betting sector since their introduction in 2001, and the Gambling Act 2005 classified FOBTs as B2s. The noble Baroness, Lady Jowell, stated at the time that if evidence of harm emerged, the £100 stake could be reduced as FOBTs were “on probation”. It is clear that the experiment to allow high-speed roulette in easily accessible betting shops has been a disaster and it is notable that as a result, the noble Baroness, Lady Jowell, herself recently called on the Government to act as the evidence of harm continues to build.

The essence of my Bill is to reduce the stake to £2 a spin. This is the maximum stake on gambling machines in all other easily accessible venues such as arcades and bingo halls. It will reduce gambling-related harm, prevent further betting shop clustering and restrict high-street money laundering.

The human misery caused is enormous. I will not rehearse all the harrowing stories, but many have been reported and they are extremely distressing. Clinical psychologist Anna Henry, who treats gambling addicts, said that FOBTs are designed to foster addiction:

“Basically the industry has created casinos in the High Street … These machines isolate the player, there is nothing to distract him from that screen. Its speed is to encourage frenzy. And thus more spending”.

More crime takes place in betting shops than in any other gambling venue. A freedom of information request to the Gambling Commission revealed 11,232 incidents in 8,980 betting shops from January to December 2014—an average of 1.25 incidents per premises, up from 0.82 the previous year. This compares to just 479 incidents related to the remaining 2,747 venues. These incidents account for 97% of police call-outs to all gambling venues.

The reality is that these machines are highly dangerous products which are a catalyst for problem gambling, social breakdown and serious crime in communities. Just take the case of a gambler in Leeds who was given a two-year sentence for attacking a betting shop worker with a knife. The man had lost £1,000 playing FOBTs—money that was intended to be a deposit on a flat. He said that he was “utterly possessed” by the machines.

FOBTs are also useful to money launderers, as huge amounts of cash can be inserted into the terminals to legitimise the proceeds of crime. There were 633 suspicious activity reports in betting shops last year related to money laundering, but much of it goes unreported. A Gambling Commission report that will be considered by the Treasury said:

“The betting sector is regarded as high-risk relative to other gambling sectors. The customer base is varied, and often customers remain anonymous to the operator within the non-remote sector. The reporting and detection of suspicious transactions in the non-remote betting sector is often frustrated by the ability of a customer to remain anonymous”.

Bookmakers have a legal duty to comply with the licensing objectives of the Gambling Act 2005, but how can they comply and keep gambling crime-free and harm-free when the FOBT stakes are so high? Each betting shop is permitted four FOBTs, which now account for more than half of bookmakers’ profits. One has only to look at the importance of these machines in the recent figures for William Hill and Ladbrokes. The gross win on each machine is worth £1,000 a week. That led to a 43% increase in the number of betting shops on the high street between 2004 and 2012.

While planning authorities are in a better position to refuse applications, licensing authorities are still required to aim to permit betting shops. They are still powerless to stop the proliferation of betting shops and FOBTs on the high street. One street in the London Borough of Newham has 18 betting shops. As a result, 93 local authorities led by Newham Borough Council submitted a proposal under the Sustainable Communities Act. They called for the stake to be cut to £2 due to the anti-social behaviour, crime and problem gambling that the machines are causing in their local areas. This unprecedented step represents the widest support that any Sustainable Communities Act proposal has ever received. The Government rejected that proposal last year, but the Local Government Association has since resubmitted it under the terms of the FCA. What will the Government’s response be in the coming months, when discussions are due to take place?

There are wider economic arguments. There has been much scaremongering about the economic impact of any action to restrict FOBT machines. The ABB has claimed that 7,800 betting shops and 39,000 jobs would be at risk if there were a reduction in the maximum FOBT stake from £100 to £2 per spin. However, a report by NERA Economic Consulting, The Stake of the Nation—Balancing the Bookies, concluded that cutting the stake on these machines would reduce the number of bookmakers by about 800, primarily where clusters had developed. Moreover, it found that the move would create a net positive 2,000 or so high-street jobs as money returned to other, more labour-intensive and productive high-street shops.

Elsewhere, other Governments are concerned about the impact of these terminals. The machines are already banned in Ireland. Above all, there is the impact of FOBTs on the vulnerable and the disadvantaged. Research published last year by SPICe, the Scottish Parliament Information Centre, found that problem gambling is seven times higher in deprived areas, seven times higher among harmful drinkers and six times higher among the mentally ill. A 2014 survey by 2CV found that 80% of all betting shop users think that FOBTs are addictive, rising to 89% among FOBT users. The survey found evidence of harmful levels of gambling. Users playing weekly or more often account for 63% of session activity and 90% of cash inserted into FOBTs.

We have all seen that the Responsible Gambling Trust is now facing problems with the Charity Commission as a result of conflicts of interest on its trustee board. I do not want to add to its woes but its lengthy research programme failed to carry out its primary purpose—establishing whether FOBTs are safe. It did, however, provide some insight into worrying trends in machine gambling, including the fact that a person gambling with higher stakes is more likely to make a poorer judgment than when gambling with lower stakes, that the number of people betting the maximum £100 stake doubles between 10 pm and midnight, and that 37% of FOBT gamblers are problem gamblers. The Gambling Commission has stated that, in interpreting the available evidence where the evidence is mixed or inconclusive, it will take a precautionary approach in accordance with its principles for licensing and regulation. So surely, in the face of this evidence, the stake should be reduced until there is an indication that it can be safely increased above £2.

The fact is that government measures to date have been ineffective. After months of grass-roots pressure and concerns expressed across the country, last year the Government introduced the Gaming Machine (Circumstances of Use) (Amendment) Regulations 2015, which were implemented on 6 April. These regulations require FOBT customers to authorise stakes of £50 or more either via account-based play or via over-the-counter staff authorisation. In January 2016, the DCMS published an evaluation of the impact of the regulations. However, a study by Landman Economics has demonstrated that the DCMS was completely unable to determine whether the regulations on the £50 stake had led to an increase in player control, let alone a reduction in the number of problem gamblers. The DCMS argues that increased session length may have led to more considered decision-making, but the time between spins increased only very marginally. It is much more likely that players who used to stake up to the £50 to £100 range are simply losing their money more slowly. This would not represent more controlled play. The report concludes that the DCMS evaluation is flawed and cannot realistically be used as a reliable guide to policy.

Where one has regard to the scale and nature of the problems that FOBT machines are causing, on the precautionary principle a very much more serious and more appropriate response is required, as set out in the Bill before us. The time for tinkering has gone, and there is no doubt that the public support action against FOBTs. In fact, a YouGov poll showed that only 4% of the public would oppose a ban on them, with 58% of those who gamble more than once a month being in favour of an all-out ban. ComRes polling showed that two-thirds of people in marginal constituencies believe that FOBT machines are harmful and they support the reduction of the maximum stake to £2. FOBTs are destroying lives and damaging communities. The Bill will reduce the maximum stake on FOBTs to £2 a spin. I believe that it will reduce the serious harm caused by the machines, deter money laundering and reduce betting shop clustering on the high street.

I am an optimist and I very much hope that the Government will support the Bill. Modest though it is, if the Government reject it, and especially if they claim that they can achieve the same goals by other means, I believe they will be obliged to answer some vital questions. Will the Minister confirm when the next review of stakes and prizes is due to take place, and that the issue of FOBT stakes will be included within it? Does he agree that, as proposed by the Gambling Commission, and given the evident harms that FOBTs are causing, the Government should act on a precautionary basis and reduce the stake on FOBTs? In that context, does the Minister believe that a substantial review of FOBTs stakes is the best way to deal with the harms the terminals are causing? Will he make sure that FOBTs are properly regulated through harm-mitigation measures to ensure that they no longer present a risk to the vulnerable? If so, how? And how will the Minister ensure that the Government properly address the money-laundering risk that FOBTs present? I beg to move and look forward to the Minister’s reply.

--- Later in debate ---

[The Earl of Courtown (Con)]

My Lords, I thank the noble Lord, Lord Clement-Jones, as ever, for this fascinating and very important opportunity to debate his Private Member’s Bill, not least because it offers the Government an opportunity to highlight existing measures in this area and to provide reassurance on what is obviously an emotive subject. All Members of the House are united in their view on these machines.

First, I will just touch on what the noble Lord, Lord Collins, said about the importance of bookmakers as a community asset. I remember from my youth spending quite a lot of time in what were then called turf accountants rather than bookmakers. The noble Lord, Lord Lipsey, is nodding—he knows exactly what I am talking about. They are a very important part of the community in the villages and towns in that part of the world.

I state categorically, particularly in response to the question asked by the noble Baroness, Lady Sherlock, that the Government understand the public concerns around B2 gaming machines and will continue to keep them under review. In April 2015, we introduced a series of measures to protect players, including regulations to end unsupervised high-stake play on B2 gaming machines and measures to give more powers to local communities by requiring planning applications to be submitted to local authorities for new betting shops.

Her Majesty’s Government subsequently conducted an evaluation of the regulations, mentioned by noble Lords, which put an end to unsupervised high-stake play on B2 gaming machines. The results were published on the government website on 21 January. In short, there are indications that, as a result of these regulations, players on B2 gaming machines may now be making a more conscious choice to control their playing behaviour. However, we believe it prudent to now consider the findings of the evaluation before deciding if there is a need for further action.

It is worth reminding the House that the industry has a responsibility to assist gamblers who display signs of problematic behaviour, including when playing these particular gaming machines. The betting industry introduced new measures in 2014 under its code on social responsibility, which was further updated in 2015. Many elements of the code were subsequently made mandatory by the Gambling Commission in its update of social responsibility provisions in its licence conditions and codes of practice in May 2015, including additional measures on gaming machines, requirements on shop window advertising and self-exclusion policies across the whole industry.

We believe that the measures that the Government, industry and the Gambling Commission are taking are currently sufficient to improve player protection across all forms of gambling, but we are equally clear that industry, along with the Government and the commission, should never feel that there is an end point to social responsibility.

The noble Lords, Lord Clement-Jones, Lord Foster and Lord Collins, and the right reverend Prelate the Bishop of St Albans mentioned the existing powers held by local authorities. I turn to the resubmission made under the Sustainable Communities Act by Newham Council and other local authorities for the Government to reduce B2 stakes to £2. Although the resubmission is currently under consideration, the Government are determined that local authorities should play a central role in managing local gambling provision—a principle deeply embedded in the Gambling Act 2005.

Although local authorities are bound by law to aim to permit gambling in so far as reasonably consistent with the licensing objectives of preventing crime and disorder, ensuring that it is fair and open and protecting children and vulnerable people, the licensing process gives authorities considerable scope to attach additional conditions to licences where necessary to achieve the licensing objectives, to review licences once they have been granted and to impose licence conditions after review.

On planning, the Government agree that responsibility for managing high streets should rest with local areas, and local authorities already have powers to control gambling premises in their areas. On recent changes, as noble Lords mentioned, new planning measures came into force in April 2015 which mean that planning permission is required for any new betting shop, allowing for a local decision.

It would not be appropriate for me to say much more on the issue while exchanges between central government and local authorities are ongoing in the wake of the Sustainable Communities Act submission. As I said, discussions with Newham Council on its resubmission are ongoing, and we will make a decision in due course.

The noble Lords, Lord Clement-Jones and Lord Collins, the right reverend Prelate and other noble Lords mentioned a review. In particular, the noble Lord, Lord Collins, mentioned a point made by my honourable friend Tracey Crouch—who, I should add, takes a particular interest in the issue of B2 machines. The Government are open-minded about the review, and will set out their view in due course. The noble Lords, Lord Clement-Jones and Lord Foster, drew attention to the rise in crime in bookmakers. Any rise in crime is concerning, and we and the Gambling Commission will look at the figures very closely, but it is important to state that the increase is from a low base. Any crime is unacceptable, but the level is equivalent to one instance per betting shop per year.

The noble Lords, Lord Clement-Jones and Lord Foster, and my noble and learned friend Lord Mackay raised the issue of money laundering—and we had amazing instruction from my noble friend Lord James of Blackheath. The Gambling Commission already requires operators to take measures to prevent money laundering through its licensing conditions and codes of practice, and it is currently consulting on regulatory changes to strengthen the fight against crime linked to gambling. In addition, the Treasury plans to consult shortly on the EU’s fourth directive on money laundering, which will introduce further measures in this area.

The noble Lords, Lord Clement-Jones and Lord Foster, raised the issue of planning powers in relation to bookmakers. Local authorities already have powers to control gambling premises in their areas. They can reject applications, grant licences with conditions, review them once granted and impose licence conditions after review.

My noble and learned friend Lord Mackay of Clashfern and the noble Lord, Lord Collins, raised the issue of B2s in Scotland. As they said, the Scotland Bill contains the agreed clauses necessary to take forward the Smith commission recommendation on B2s. The Bill will give the Scottish Parliament and Scottish Ministers the power to vary the number of subcategory B2 gaming machines permitted by new betting premises licences in line with the recommendations made by the commission. Both noble Lords raised other points in connection with that issue, and I will write to them to clarify our position.

The noble Lord, Lord Lipsey, and the noble Baroness, Lady Sherlock, raised an issue relating to the recent Paddy Power case. The dereliction of duty by Paddy Power is completely unacceptable. The case shows that bookmakers will not be able to get away with failing to meet their licence conditions. Gambling firms have a duty to comply with their licence rules to the letter, and must ensure that there is absolute consistency across their business. The Government will continue to monitor the effectiveness of existing gambling controls, and will take further action if required.

My noble friend Lord James of Blackheath and the noble Lord, Lord Foster, raised the issue of spin time. As they said, the spin time of B2 machines is about 20 seconds, compared to a rather faster B3 gaming machine, which has a spin cycle of about 2.5 seconds. As noble Lords will be aware, there is limited evidence on the impact of game speed on gambling-related harm. The Government are of course happy to consider any new evidence to inform policy in this area.

Several noble Lords, including the noble Baronesses, Lady Sherlock and Lady Howe, and the noble Lord, Lord Clement-Jones, mentioned problem gamblers on B2 machines. It is important to clarify this point. The sample of gamblers used in the RGT research was specifically sought to include a high proportion of problem gamblers to assess their behaviour on those gaming machines. The sample is therefore not entirely representative of wider gaming-machine players.

The right reverend Prelate the Bishop of St Albans and the noble Baroness, Lady Howe, also raised the issue of tax on B2 machines. I do not have the information available at present, and I will of course write to the noble Baroness and the right reverend Prelate. The Government understand the concerns about problem gambling and, in particular, about fixed-odds betting terminals. We are clear that this issue will be kept under continual review.

I re-emphasise that we will continue to keep this under review as well as the points relating to stake size. The Government continue to monitor the effects of existing controls and, if need be, will take action if they are found to be insufficient. The principal purpose of the Bill is to reduce the maximum B2 stake. There is no need to use a Bill to do this as a stake reduction could be achieved using the existing powers set out in the Gambling Act 2005, which enables changes to stakes and prizes for all types of gambling machines to be made via secondary legislation. However, the Government recognise that problem gambling, which has remained at less than 1% of the adult population, is not limited to one product or one issue, such as stake size. Making changes to B2 stakes now would tie the Government’s hands when trying to promote a comprehensive strategy.

[Lord Clement-Jones]

My Lords, before we proceed any further, can the Minister give us an indication of the timing of the review?

[The Earl of Courtown]

I am sorry I have not referred to that point, which was also raised by the noble Lord, Lord Collins. I cannot give any indication of that, but as soon as I am able to give any indication I will write to noble Lords and put a copy in the Library. At the moment, I am not able to give any more information.

We recognise this problem. The Bill would tie the Government’s hands when trying to promote a comprehensive strategy to tackle problem gambling across the piece. The Government therefore express reservations about the Bill.

[Lord Clement-Jones]

My Lords, I thank all those who spoke in the debate today. We heard some very powerful and very interesting speeches, and I am extremely grateful for the support around the House and, indeed, outside the House. A number of noble Lords mentioned a letter from some very prominent Members of the Commons and others in the Times today. We have had some very instructive speeches, too. I think we may have confirmed the reputation of the Lords as a den of iniquity, especially for specialists in money-laundering and various other nefarious activities. That will no doubt mean that Hansard is read with unusual interest in future.

I want to reassure Members of the House, particularly those who enjoy a regular flutter, that despite having some Quaker antecedents, I am no puritan. Indeed, I had a cousin who was the Bishop of St Albans. I am very much of the liberal persuasion on that sort of matter. My late father-in-law owned a casino, so if that is not the sort of respectable quality to recommend me to the gambling industry, I do not know what will. This is about problem gambling, a social ill; it is not about ordinary, everyday having a flutter. It really is not. I hope that people will take that away.

One of the key issues that was raised by the noble Lord, Lord Smith, the noble Baroness, Lady Sherlock, and the Minister was action by the industry, which has not been forthcoming. That is one of the problems in all this. I suppose my prejudice would be first in favour of voluntary action, but the fact is that that has not been forthcoming. Whether or not we think it has been effective, the Government had to regulate on the £50 supervised stake. That was not volunteered by the industry, so we have real questions about the activities of bookmakers.

The noble Lord, Lord James, was extremely interesting, and if we ever got to a Committee stage on this Bill, I am sure we would have several happy hours looking at some of the intricacies of the regulations on the software and disclosure and at issues about spins and so on and so forth. I think I had better go with the noble Lord, Lord James, to my nearest bookmakers and get further instruction. The noble Lord, Lord Lipsey, will probably come along as well.

Some very interesting points were made. The noble and learned Lord, Lord Mackay of Clashfern, compared this issue with that of legal highs, on which we have legislated. That is entirely right. This is a damaging social problem. He also talked about money laundering.

I wish I was as shrewd as the noble Lord, Lord Lipsey, is in the bets he has placed. I do not think anybody would have approved of me if I had placed the kind of bets that he has placed, but nevertheless I bow to his knowledge of the industry. I was quite relieved that at the end he came out in support, because I know that his knowledge is considerable. As he says, there will never be enough evidence because it is very difficult to extract if the industry does not allow the access that is necessary to evaluate the situation. The precautionary principle has to apply. That is why the Gambling Commission adopts it.

A number of noble Lords talked particularly about the concentration—I do not use the expression “targeting”—in the most deprived areas. I think the noble Baroness, Lady Sherlock, had it right in terms of “correlation”. I think a number of noble Lords would go as far as that. It may tip over into targeting, but we do not yet have that evidence.

In answer to the noble Lord, Lord Smith, who said we have online gambling and so on, we know that FOBTs are peculiarly damaging and are peculiarly related to problem gambling. As we get evidence that particular forms of gambling disproportionately cause problem gambling—and I pay tribute to the noble Baroness, Lady Howe, who has campaigned on online gambling—then of course we should tackle it, but that does not mean to say that the best is the enemy of the good. That is a very important point when you are legislating. I take the noble Lord’s point about casinos. I have no argument with high-stakes terminals in casinos, properly regulated. Where the environment is right, of course these machines can be legitimately used. It is in betting shops where we are particularly concerned.

The way that the right reverend Prelate talked about the real problems at the grass roots was very telling. He talked very eloquently about the human misery, harm, addiction and so on, the need to gather evidence and the challenge to the Government to take the trouble to gather the evidence. The noble Baroness, Lady Sherlock, described betting shops turning into casinos, and that was particularly powerful.

I am grateful for the contribution from the noble Lord, Lord Collins. I understand that the Opposition take a slightly different approach. Their approach is more about licensing and planning rather than a change of stakes. They, like the Government, would prefer to see that debated on a review of stakes and prizes, and I understand that, but that means there must be genuine intent to review.

Although the cricket season has not started, the Minister started with a dead bat but rather livened up and started playing a few strokes, which was quite interesting. He started coming round to the fact that, yes, there is a problem and said that the Government might think about it in the review of stakes and prizes. We do not know when the review is going to be, but it is always a possibility that we will talk about it. That may be about an eighth of a loaf, but at least we are moving a little further than we were before this debate started.

The Minister raised all sorts of matters including improvements in planning and self-exclusion. I do not think self-exclusion has been proven to be effective. The issue is about the stake. We are going to be keeping up the pressure on that. We need to listen to those who have been intimately connected to the industry.

The noble Baroness, Lady Howe, mentioned Mr Fintan Drury, a former chairman and non-executive of Paddy Power, and I think that we really do need to listen to those who have been intimately connected with the industry. Even he is saying:

“Gambling may be less addictive than cigarettes but its potential to trap those with a predilection to spend money irresponsibly is beyond doubt. I have a few friends who go to Gamblers Anonymous meetings and whose testimony is not that different to those who attend AA meetings. These people would not want gambling to be banned outright — that would simply drive it underground. What they would argue, though, is that easy access to addictive behaviour contributes to the problem and that society has a responsibility to protect its most vulnerable from making bad choices”.

I would have thought that any political party would subscribe to that philosophy. I certainly do, and I very much hope that we will listen to those informed voices as we proceed.

I hope that the House will give the Bill a second Reading and that we can move on to the next stage.

Bill read a second time and committed to a Committee of the Whole House.