Baroness Howe of Idlicote
Main Page: Baroness Howe of Idlicote (Crossbench - Life peer)Gambling (Licensing and Advertising) Bill
Baroness Howe of Idlicote Excerpts“(b) after subsection (5) insert—“(6) The Commission may give a direction under this subsection if the Commission reasonably believe that a person or organisation who does not hold a remote gambling licence is providing remote gambling services in the United Kingdom.
(7) A direction under subsection (6) may be given to—
(a) a particular person operating in the financial sector,(b) any description of persons operating in that sector, or(c) all persons operating in that sector.(8) A direction under subsection (6) may require a relevant person not to enter into or continue to participate in—
(a) a specified transaction or business relationship with a designated person,(b) a specified description of transactions or business relationships with a designated person, or(c) any transaction or business relationship with a designated person.(9) Any reference in this section to a person operating in the financial sector is to a credit or financial institution that—
(a) is a United Kingdom person, or(b) is acting in the course of a business carried on by it in the United Kingdom.(10) In this section—
“credit institution” and “financial institution” have the meanings given in paragraph 5 of Schedule 7 to the Counter-Terrorism Act 2008;
“designated person”, in relation to a direction, means any of the persons in relation to whom the direction is given;
“relevant person”, in relation to a direction, means any of the persons to whom the direction is given.””
Baroness Howe of Idlicote (CB)
My Lords, Amendment 1 is in my name and that of the noble Lord, Lord Stevenson. It would give the Gambling Commission a discretionary power to block financial transactions between people living in the UK and online gambling websites that have not secured a UK Gambling Commission licence. The aim is to prevent funds being transferred to illegal operators, thereby creating a disincentive both to the company to operate illegally and to UK gamblers, who will find it much easier to go to the many licensed operators available.
The Government have argued that this Bill is about consumer protection. On 19 November the Minister, Helen Grant, said that the new licensing proposals address,
“the fundamental purpose of the Bill, which is to enhance consumer protection by ensuring that all operators offering remote gambling in Britain are regulated by the Gambling Commission, whether they are based in Britain or overseas”.—[Official Report, Commons, Gambling (Licensing and Advertising) Bill Committee, 19/11/13; col. 74.]
At first glance, this seems absolutely right because the Bill, for the very first time, requires all online gambling providers based outside the UK who want to access the UK market to get a UK Gambling Commission licence. For this to constitute a meaningful bid for greater protection, however, it must be connected to a parallel provision preventing those providers which do not have a licence from selling to UK consumers. The Bill before us contains no such provision. In the absence of a credible enforcement mechanism, the primary implications of the Bill are twofold.
First, there would be significant liberalisation of online gambling advertising. At present, only providers located in a limited number of whitelisted and European Economic Area jurisdictions can advertise in the UK. However, under the Bill any provider based anywhere in the UK will be able to advertise in the UK, so long as they get a UK Gambling Commission licence. This significantly widens the scope for online gambling advertising. Not only that: it would be advertising liberalisation for a form of gambling which is associated with a significantly higher problem prevalence figure than gambling generally. The 2010 general problem prevalence figure was 0.9% but it was more than 9% for online on an annual basis and more than 17% on a monthly basis.
The second implication is that of providing a framework for increasing the tax take in co-operation with the 2014 Finance Bill. The 2005 Act created a tax loophole by allowing providers based in EEA or whitelisted jurisdictions still to advertise in the UK. All but one moved to whitelisted jurisdictions under more generous regimes. The Bill corrects this loophole by providing the Treasury with a framework to address the problem. It requires all providers accessing the UK market to get a licence, while the Finance Bill requires all online gambling providers with a UK licence to pay UK tax. It will come as no surprise to your Lordships that, as the wife of a former Chancellor of the Exchequer, I have absolutely no problem with seeking to close a tax loophole. However, the good news is that that tax loophole can be closed at the same time as providing a robust enforcement regime that upholds the consumer protection objective set out by Helen Grant. We do not have to choose between one and the other.
The Government have of course sought to argue that they have the necessary enforcement mechanism. At Second Reading, the Minister said:
“Where illegal operators attempt to target British consumers, the Government and the Gambling Commission are confident that action can be taken through existing enforcement mechanisms to disrupt and stop unlawful gambling. These include action on illegal advertising, player education and, ultimately, prosecution”.—[Official Report, 17/12/13; col. 1252.]
The problem with this is that neither clamping down on illegal advertising nor better player protection will prevent illegal operators accessing the UK market. That leaves prosecution but the truth is that the DCMS has already recognised in its remote gambling consultation that prosecution has no teeth. The DCMS said that,
“we recognise that without extra-territorial extent, it will be difficult to actually pursue the offence through the Courts if the operator is located outside Britain”.
Given the clear problems with the enforcement mechanisms highlighted by the Government, it has been clear to me since the first day when the Bill appeared that it is crying out for a proper enforcement mechanism. In this context, as I have said previously, Amendment 1, which gives the Gambling Commission discretionary financial transaction blocking powers to protect UK consumers from transacting with illegal providers, crucially restores integrity to the Bill. Far from being a curious add-on my amendment, in providing a credible enforcement mechanism, is central to the main purpose of the Bill.
When pressed on this point the Government have, until now, always rejected financial transaction blocking on the basis that the evidence is mixed.
Although I readily admit that financial transaction blocking is not 100% successful—very few public policy solutions are—it is my contention that it is the best available enforcement mechanism, and one that would greatly enhance the Bill. In making this case, I want to make some points. First, I shall briefly consider the experiences of other jurisdictions. In the USA, the Unlawful Internet Gambling Enforcement Act 2006 prohibits any person, including a business, engaged in the business of betting or wagering from knowingly accepting payments in connection with the participation of another person in illegal remote gambling. In practice, this means that credit and debit cards and banks do not allow their services to be used in relation to a merchant code associated with remote gambling. This means that if a person tries to gamble on an illegal or unregulated website, they will not be able to transfer funds directly into their gambling account. These merchant codes are used as a matter of course and as part of agreements made between gambling entities and the financial sector.
My conversations with online gambling providers suggest that, while this approach has not been perfect, it has made a very significant positive difference. Indeed, such is its success that other countries have since followed its lead; in Europe the most notable is Norway, as well as France, Belgium and Estonia. Other jurisdictions have also implemented policies that reflect the blocking of the financial flow to illegal websites—for example, in Israel, Turkey, Singapore and Malaysia.
Secondly, having looked at the experience of other jurisdictions, I want to reflect on the appropriateness of financial transaction blocking in a British context. In considering all the jurisdictions that have implemented FTB, it is vital to appreciate that they operate closed or relatively closed markets. For example, the US does not allow remote gambling across state borders or from overseas. Norway, meanwhile, operates an even more restrictive market.
If one operates a closed or relatively closed market, one faces two challenges. First, one has to block lots of transactions. That would not be the case in the UK, where we operate an open market. Then there is a greater incentive in closed or relatively closed markets for punters to seek to evade the blocks than in an open market, where the available odds should be relatively competitive. In a market like the UK, where there is a need for less blocking and where—on the occasions when it is used—financial transaction blocking is more likely to be effective, FTB is likely to be more successful than in the jurisdictions where it has been employed thus far.
Thirdly, mindful of the above, I want to reflect on the huge irony of the position that the Government have adopted. They have rejected financial transaction blocking on the basis that the results are “mixed”, citing instead their preference for prosecution. Given that, while not perfect, FTB has encountered some considerable success, and given that it is more likely to be successful in the UK than in any other jurisdiction where it has been used, I find it a little extraordinary that the Government should reject it in favour of prosecution on the basis that FTB is not perfect. Prosecution is far less likely to be successful than FTB. As we have seen by the Government’s own admission, prosecution does not work. The idea that the UK Government can afford to chase multiple small online providers through the courts of multiple jurisdictions is, surely, fanciful. The providers in question know that the chances of their ever being successfully prosecuted are tiny, a calculated risk that they can afford to take. By contrast, FTB is likely to have a significant deterrent effect on small illegal providers, as the experience of Norway has demonstrated.
Yesterday many noble Lords will have received a letter from the Minister, the noble Lord, Lord Gardiner, that addresses enforcement. The letter says:
“I am pleased to confirm that the Gambling Commission has reached agreement with a number of major payment systems organisations to work together to block financial transactions with unlicensed operators”.
I very much welcome this announcement. It really is quite a turnaround from the suggestion during the earlier stages of the Bill that its enforcement provisions were sufficient. However, just as I highlighted deficiencies in what the Government said during those stages, I feel compelled to do so again today, because while I warmly welcome the announcement I do not believe that it constitutes a credible alternative solution.
The problem is that it pertains to only three payment processes and is voluntary. Of course Visa is a very big player and covers a large part of the financial transaction market, so you might be tempted to conclude that this solution would address a large part of the problem. In reality, though, the market is dynamic, and experience from abroad demonstrates that alternative payment mechanisms spring up to do the job in place of the big names that are persuaded in the name of social responsibility to adopt a different approach on a self-regulatory basis. Thus I am firmly of the opinion that we need the statutory approach of Amendment 1, which applies to all payment mechanisms.
I have heard it said that the Government do not want to accept amendments to the Bill. They contend that it is a simple Bill, with a sharp focus that amendments would only distract from. Far from being a distraction from the main purpose of the Bill, my Amendment 1, by providing a credible enforcement mechanism, is absolutely key to that central purpose. Rather than placing the simple integrity of the Bill in jeopardy, the amendment’s key mission is actually to complete that integrity—to ensure that rather than being half a Bill, alienated from an enforcement mechanism, it is in fact a whole Bill, very much at one with its enforcement mechanism. My modest discretionary financial transaction blocking amendment would restore integrity to the Bill, in my view, something that is urgently needed. I hope that in due course the Government will agree, and I beg to move.
Baroness Jolly (LD)
My Lords, I thank noble Lords for a wide-ranging and constructive series of discussions as the Bill has progressed to this stage. As we said earlier, this is a small, five-clause Bill focusing on consumer protection. As a result of it, all overseas operators selling to British consumers—around 85% of the market—will be required to hold a British Gambling Commission licence. That will mean that those operators will be subject to robust and consistent regulation and that will increase protection for consumers.
Although it had been introduced with a distinct focus on new licensing and advertising arrangements for remote gambling activities, we have collectively explored a fuller set of related gambling considerations. Noble Lords will have seen some of them announced by the Secretary of State over the weekend. Work which had been ongoing has been catalysed by these debates, in which some very important matters arose, while ensuring that the core of the Bill, which I think I can say is widely supported, can pass into law.
One such issue is in relation to enforcement and I thank the noble Baroness, Lady Howe, for her amendment. It would enable the Gambling Commission to give direction to financial institutions to stop financial transactions with operators which do not hold a Gambling Commission licence. This is known as financial transaction blocking. The Government share the overall objective articulated so clearly by noble Lords, which is at the centre of this amendment, but the Bill must be enforceable. That is central to achieving the consumer protection purposes that lie at the heart of the Bill, which will extend the existing enforcement provisions to offshore operators selling or advertising into the GB market.
The Bill includes three important tools. First, the Gambling Commission can take action against illegal advertising. That is important as advertising is the lifeblood of so many operators. The Bill will make it easier for advertisers to identify what can and what cannot be advertised into the UK. Only lawful gambling may be advertised. Secondly, player education is another important tool. The current system makes it impossible for the Gambling Commission to advise consumers to buy from commission-licensed operators, as operators from anywhere in the world, subject to a range of different regulatory regimes, can transact with consumers in Great Britain. Thirdly, the Gambling Commission has powers to prosecute, so the commission will have the legal powers to pursue any unlicensed operators, wherever they are based. It is also worth noting that, although the collection of tax is a matter for HMRC, it has extensive powers of its own that may be deployed in the case of unlicensed operators, where this is appropriate.
However, alongside this, I can announce a further mechanism. I am pleased to confirm that the Gambling Commission has reached agreement with major payment systems organisations—notably MasterCard, PayPal and Visa Europe—to work together to block financial transactions with unlicensed operators which seek to use these payment systems for illegal purposes. What does this actually mean in practice? It means that when a consumer uses payment facilities for illegal gambling this may amount to a breach of the payment system’s terms and conditions. These require that all transactions must be legal in all applicable jurisdictions. Such a breach may result in the operator having its payment facilities withdrawn by the payment system. This process will disrupt revenue to unlicensed gambling operators selling into our British market.
We have heard the arguments in detail throughout the passage of the Bill as to the effectiveness of financial transaction blocking. We believe that the approach I have just outlined is a good way to test and evaluate this mechanism. The mechanism provides an efficient way of achieving blocking in a single case, which is mostly where we expect this approach will be used. The reason this approach is efficient is that the Gambling Commission has a direct route to the payment organisations and does not need to go through a potentially lengthy and expensive court process.
However, as we have all agreed in this debate, the landscape can change quickly. Technology moves faster than legislation. The nature of these arrangements is such that they will be adaptable and can respond to the very latest developments. That is why the Government believe this is the most appropriate way to proceed: working in partnership with these organisations that share our determination to tackle illegal activity. We want to ensure that the enforcement arrangements continue to be effective and have asked the commission to report on its enforcement activities in relation to remote gambling. The Gambling Commission will provide an assessment of the effectiveness of these arrangements in enforcing the Bill in its annual report to Parliament. The Government and the Gambling Commission will use this to assess the success of this approach and monitor the implementation of the new regime. This will enable the Government to ensure that the Gambling Commission continues to have all the enforcement tools it needs.
I thank the noble Baroness for bringing this issue forward and all noble Lords who took part in the debate. I hope that I have assured the House that the Government’s approach is the most appropriate way to achieve the objectives behind the amendment and does not require legislative change. I therefore ask the noble Baroness to withdraw her amendment.
Baroness Howe of Idlicote
My Lords, I am grateful to all noble Lords who have participated in this important debate. I also thank the Minister, the noble Baroness, Lady Jolly, who kindly met me yesterday to outline the steps that the Government have now taken to begin to address this problem. I very much welcome, too, the fact that rather than saying that there already are adequate enforcement mechanisms, the Government are now bringing forward, somewhat belatedly, the measures that have been outlined to us today.
However, this really is a classic example of too little, too late. The online gambling providers we have consulted have been clear that, even if you target big transaction-processing companies that currently service the market but do not adopt a more statutory approach that relates to all such companies, gambling transactions will simply migrate to other or new providers. I still believe that the Bill is flawed because of this lack of an enforcement mechanism and because of self-regulatory measures, especially those which relate only to three providers, with no compensation for this. Separated from a proper means of enforcement, the Gambling (Licensing and Advertising) Bill is still very much half a Bill.
As other speakers have noted, to date the Bill has passed unamended through the Commons and also until Report stage in the Lords. Increasingly, everyone acknowledges that we are here as a revising Chamber to spot problems and to try and put them right. I would argue that we have identified a significant problem here that cannot be addressed by a voluntary agreement between just these three providers, which may or may not at some future stage give rise to litigation.
We have today the opportunity to address this shortfall. Although I hope very much that the Government will accept other amendments today, I want to take this opportunity to test the opinion of the House.
Lord Mancroft (Con)
My Lords, I had not intended to intervene in this short debate but, after listening to my noble friend Lord Clement-Jones, I cannot resist doing do.
Looking around your Lordships’ rather empty House at this late hour, I see that I am the only Member who sat on the joint scrutiny committee on the 2003-04 Bill, which became the 2005 Act. I remember the tortuous hours of evidence that we heard about the effects that this new phenomenon of gambling advertising would have. I do not make this as a party-political point but as a general political point: the Government of the day swept that aside. I heard my noble friend give a figure of a 600% increase but that was of course from a low base, which was zero; there was no advertising of this sort at that time. It was introduced under the 2005 Act, amid a lot of people—some sensible and some not so sensible—saying that it would cause awful mayhem. Of course, there is no mayhem and nightmare because the background is that we were also advised that we should take into account what is now called evidence-based policy, which is introduced on expert advice and allows the Minister of the day to avoid exercising his political judgment—probably the reason for which he was elected, but that is neither here nor there.
However, the reality is that this debate is the child of the 2005 Act, which was put through far too fast, not thought through and not based on evidence. Now we are in this Bill having in part to clean up some of the mess that the Act created—quite rightly, because that is what Parliament does from time to time. However, that is the history and everyone has to recognise that that is what happens when you legislate in haste.
Baroness Howe of Idlicote
My Lords, I add my support for the amendment in the names of the noble Baroness, Lady Jones, and the noble Lord, Lord Stevenson. Having listened to everybody’s contributions, I think that what is really important here is the effect on children of this increased access to advertising. It provides an early start to children getting gambling problems, which then have to be sorted out, and that is what my amendment was seeking to address. I do not feel one way or the other about what other noble Lords have said but I think that the age of the children being exposed to this advertising is important. A 10 o’clock watershed would be ideal if only it could be applied to online activity, although we all know that it cannot. Nevertheless, other ways of checking this should certainly be looked at in detail.
Baroness Howe of Idlicote
My Lords, I also support the amendment in the name of the noble Lord, Lord Browne. He put the case so clearly, as did the noble Lord, Lord Phillips, that I find it very difficult to think of any further reasons at all for not accepting it. He and the noble Lord, Lord Phillips, were present at that gathering where we heard, as has been said, these incredible addicts talk extremely frankly about their own addiction and what situations it had caused for them and their families and about the total horror of all that. I therefore hope the Government will realise that there is a role for what is proposed in the amendment and take on board just how important it is to make certain that it is included in the Bill.
The Lord Bishop of Chester
My Lords, I associate myself very closely with the speech of the noble Lord, Lord Browne, and that of the noble Lord, Lord Phillips, so I will not repeat the points they made. Noble Lords will realise that it is quite rare for Members from this Bench to quote the scriptures. For understandable reasons we are a bit coy about doing that. However, I cannot avoid going to a verse from the First Epistle to Timothy, which says that,
“the love of money is the root of all evil”.
There is great truth in that. The lure and attraction of wealth so often lies behind the person who turns gambling from an innocent pastime into an obsession, an addiction or whatever. A responsible society has to do what it can to protect people against these false gods and false goals. When you get into the digital world, you simply raise the stakes, to use a gambling analogy. If I am a problem gambler and I have to walk down to the betting shop in Chester, there is a natural restraint—there may be only two or three people there and they will wonder what I am doing when I walk through the door. But if those restraints are taken away, you have to be cognisant of the potential dangers.
I often think that we are now, in the digital age, in a digital version of the wild west, where there was all the excitement and discovery and all the positive aspects in America when it opened up, but the reality of law and order had to come in later. We must provide proper protection to people in the online world.
I shall briefly refer to a completely different area that concerns me very greatly—the way in which the internet is used in relation to pornography. The noble Baroness, Lady Howe, has talked about this on previous occasions. I have had a particular problem with two or three clergy in my diocese who have innocently thought that accessing child pornography on the internet was somehow not as serious as interfering directly with an actual human being. Of course, the law quite properly says that accessing child pornography on the internet is to be complicit in the actual original abuse. People have that sort of innocent view of the internet so often. The more checks and balances that we can introduce, the better.
If the net effect of this Bill is that the advertising of online gambling is much more in our face and much more prevalent, it behoves us to put in place what protections we can. I warmly support the amendment.