Gambling Harm (Social and Economic Impact of the Gambling Industry Committee Report)

Lord Butler of Brockwell Excerpts

Wednesday 27th April 2022 Grand Committee

[Lord Butler of Brockwell (CB)]

My Lords, I declare my interest as a vice-chair of Peers for Gambling Reform. I, too, was a member of the House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry, which was so excellently chaired by the noble Lord, Lord Grade, and supported by a splendid secretariat, as has been said.

I found membership of this Select Committee a sobering experience. As we have heard, gambling is a very big industry and it brings enjoyment to many people. but there is another side of the picture. The committee heard how addictive gambling causes homelessness, loss of employment, imprisonment, depression, alcohol dependency and, most seriously, suicide. When we take into account the figures for problem gambling, particularly among young people, as quoted by the noble Lord, Lord Grade, it is clear that this is a really serious problem in our society. All political parties have acknowledged that by committing themselves to addressing it—and that now needs to take place. But effective action to prevent the excesses, while allowing the pleasure to continue, needs joined-up thinking across government.

I and the Select Committee feared that my old department, the Treasury, would be one of the things that would drag the anchor on reform of this problem. We thought the Treasury would be inhibited by fear of killing the goose that lays the golden egg, in the form of contributions to the Exchequer each year. But this is to look at only one side of the account. It is not just about the yield from the revenue, but, even if it were, Peers for Gambling Reform commissioned NERA Economic Consulting, as the right reverend Prelate said, to assess the economic effects of the reforms that the Select Committee recommended. NERA’s report is well worth reading. It assessed, first, that the industry’s profits are easily robust enough to exceed the effects of a mandatory levy, which could fund education and treatment of those addicted.

On the Exchequer side of the account, NERA’s report assessed not only that there would be a net gain to the Exchequer on the revenue side, but that this would be all the greater when one takes into account savings in the amount that the Government currently spend on dealing with the effects of gambling, primarily through healthcare costs. This really is a problem that can be addressed only by looking across the range of departments. In addition, by diverting some of the expenditure by the public in the form of problem gambling to other sectors that are more labour-intensive, there could be a net gain of some 30,000 jobs to the economy. So it is not simply an Exchequer matter; this is an issue where there are gains to the economy as a whole—

[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

If the noble Lord will forgive me, I am afraid that we are about to have a vote. We will take a small moment to press our buttons and then reconvene in a moment. I apologise to the noble Lord; he was mid-flow.

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[The Deputy Chairman of Committees (Lord Duncan of Springbank) (Con)]

My Lords, we would normally delay for 10 minutes for a vote, but I suspect your Lordships have all pressed your buttons already. We might be able to continue if the Committee does not mind occasional interruptions by the jingling Bells. Shall we do that? Lord Butler, do you wish to continue?

[Lord Butler of Brockwell (CB)]

My Lords, before the interruption I was saying that this is not just an issue for the Exchequer. There are gains for the economy as a whole if expenditure by the public in the form of problem gambling is reduced and diverted to other sectors which are more labour-intensive. The gambling industry itself is not very labour-intensive and the expenditure of those sorts of sums will generate more employment elsewhere. NERA has assessed that there could be a net gain to the economy of as many as 30,000 jobs and up to £400 million in employee earnings, which of course in itself would generate revenue to the Exchequer.

The coming publication of the White Paper is a once-in-a-generation opportunity to address deep-seated social issues. By addressing the harms of addictive gambling, the Government’s review has a chance to bring about not only a major social reform but one which is economically viable and fiscally advantageous.

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[Viscount Astor (Con)]

My Lords, I welcome this very good report from the Select Committee chaired by my noble friend Lord Grade, which we finally have a chance to debate this afternoon. I will address my remarks primarily to gambling in relation to horseracing, but it is important to start by pointing out what is missing from this report: the huge growth of illegal gaming sites. A PwC report published in February 2021 estimated that there were 260,000 users of these sites, gambling £1.4 billion a year. We know that those numbers have risen since that report, and there are now estimated to be at least half a million people spending over £2 billion a year on illegal sites.

The reason that this is such a serious concern is that problem gamblers barred from legal sites move seamlessly to illegal ones which have absolutely no protections—no player protection, no anti-money laundering, no tax collection and no sporting integrity. What is even more worrying is that the Gambling Commission seems to concern itself only with legal operators and ignores the evidence of the problem of illegal gaming. It may be that the commission does not see its remit extending to illegal operators based either in this country or outside it. If that is the case, its remit should be extended and it should have those necessary powers.

With the rise of internet gambling, the Government have to make a judgment on regulation. Too little, and it does not work; too much, and it will lead to an explosion in the growth of the black market. Too often in the past, as my noble friend said, the Gambling Commission has not used the substantial powers it already has, whether by fines or orders to make book- makers or gaming companies return bets.

I declare that I own a racecourse—sorry, a racehorse, not a racecourse. I occasionally put a bet on the horse when it runs. It does not win very often, but it did win last year. I ought to also declare that many years ago, on behalf of what was then the Department of National Heritage, I took the Bill which introduced the National Lottery through your Lordships’ House. After the Bill became an Act, we were encouraged to buy a lottery ticket, which we all did. There was then a sudden panic, because we had a letter from the Cabinet Secretary—perhaps the noble Lord, Lord Butler—asking us to promise to give the money to charity should we win. My response, which I am not sure ever got back to the Cabinet Office, was that if I won a fiver, I would certainly give the money to charity, but that if I won the jackpot, I would consider my position in Her Majesty’s Government very carefully.

[Lord Butler of Brockwell (CB)]

Not guilty, my Lords.

[Viscount Astor (Con)]

I am grateful for the noble Lord’s response.

Turning back to the Select Committee report, it thoroughly highlights the difficulty of gambling issues. We need some workable basis of affordability which protects without pushing problem gamblers into the illegal unregulated sector. As I understand it, the remit of affordability was not originally part of the role of the Gambling Commission. If it is to be, the Gambling Commission must improve its understanding of the new technology faced by the punters. I believe that that should be a major part of its role, but it must be up to the Government to bring forward guidelines that have a sensible system for both the commission and the industry to manage affordability, and that process must be subject to parliamentary scrutiny. The guidelines on affordability to be followed by operators having been set out by the Government, the Gambling Commission must be the regulator.

Gaming operators have the technology; they are quite capable of rigorous checking and spotting those who regularly lose significant amounts of money. It should be in their interest to manage affordability, but, as my noble friend said, it is a conundrum that this business faces all the time. We must make sure that the gaming companies have to prove that they are managing the issue of affordability. If not, they should be fined or, as a last resort, have their licences withdrawn by the Gambling Commission. Indeed, the idea of having an ombudsman to deal with problem gambling is a very good one.

It is important to stress how illegal gaming is spreading throughout the world. For example, in France and Norway, where there are state monopolies for gaming, the black market is now 60% of all money staked, so it is a serious issue. Gambling companies are quick to entice one to have a bet, but I know from talking to those who occasionally bet on horses that if you win three races three days running, they are quick to close your account. They have the technology; we must make sure that they use it and that must be enforced.

Racing is one sport that benefits from a hypothecated tax: the horseracing betting levy. It is based on the gross profits of bookmakers. It provides over £80 million a year to racing and, without the levy support, many racecourses would not be viable. The Horserace Betting Levy Board does a very good job of helping racing. As an aside, I hope that the Government have given up the ludicrous idea a couple of years ago of abolishing the levy board and subsuming it into the Gambling Commission—not a good idea.

As some of your Lordships will know, the levy needs reform because it is based on gross profit. Over recent years, as turnover has increased, gaming companies’ gross margins have fallen but they still make the same net profit, so the levy income is under threat of decline. This is a lesson for anybody who promotes a levy or a tax to deal with problem gambling: if there is to be one, it cannot be based on gross margin, it must be based on turnover; otherwise, it is subject to huge fluctuations.

Your Lordships would expect me, as someone who is keen on racing, to say that online games and slot machines are a much more serious problem than betting on horses. That does not mean to say that racing does not have issues; it has problems and we must deal with them. There is a strong argument that there should be an age limit on betting on horseracing. It might be 21, some even argue for 25, but there certainly should be a rise in the age limit for those betting on horseracing either at a racecourse or online.

I hope the Government will not allow themselves to be bullied by the large gaming companies, now capitalised in their billions and focused primarily, I have to say, on the rapidly expanding US market. I am glad that the Select Committee report recognised that bookmakers should still be allowed to sponsor horseracing and greyhound racing; it allows them to give something back to racing, and racing needs their support to have decent prize money.

I should also say that racing is affected by illegal gambling by the loss of media rights income. If you go to a racecourse, you often see a drone flying adjacent to the course relaying pictures to illegal operators at a much faster rate than television, because they operate at a high-spectrum frequency, as opposed to the low spectrum used by terrestrial television. This allows illegal betting not only in this country but offshore and beats the standard bookmaking market, so it is affecting the integrity of racing. It is very difficult to control, because drones can fly higher or slightly further away and their cameras are so good that you cannot stop them.

I believe there is a solution: follow the money. That is my key message to your Lordships. It is a way of dealing not only with drones but with illegal betting, whether in this country or through foreign-based operators. It is a £2 billion problem and growing. We need an amendment to the Gambling Act 2005 so that we can follow the money, trace it and stop it; otherwise, all the hard work to be done to help problem gamblers will be wasted. It is important to note that black market bookmakers target those who are self-excluded from regulated bookmaking sites. They go for those vulnerable people, and that is why it is important.

I hope the Government will look seriously at an amendment to the Gambling Act 2005. If they do not, I have drawn up a Private Member’s Bill that I hope to get a chance to propose in the next Session of Parliament that will do the same. I have it in my back pocket and am happy to give a copy to the Minister.