Gambling Act 2005 (Operating Licence Conditions) (Amendment) Regulations 2018

Lord Faulkner of Worcester Excerpts

Tuesday 20th March 2018 Grand Committee

[Baroness Chisholm of Owlpen (Con)]

My Lords, the draft regulations would impose a new mandatory condition on the holders of any betting operating licence issued under the Gambling Act 2005. The purpose of this new condition is to prevent these operators accepting bets from British consumers on the outcome of the EuroMillions draw or a EuroMillions game in a participating country outside the UK. Section 95 of the Gambling Act 2005 already prohibits the holder of a betting licence from offering a bet on the outcome of any lottery which forms part of the National Lottery. This includes the lottery known in the UK as EuroMillions.

This additional licence condition extends the existing prohibition on betting on the National Lottery to all EuroMillions lottery games, and will apply to all general betting operating licences, pool betting licences, and betting intermediary licences issued by the Gambling Commission. This will reduce customer confusion that has arisen as a result of operators offering these bets and maintain the “clear blue water” between the National Lottery and other forms of gambling, as set out in Section 95 of the Gambling Act 2005.

I will set out the background to this SI. Because EuroMillions is structured as a separate game in each of the nine countries in which it is played, a small number of gambling operators are able to circumvent the prohibition in Section 95 and offer bets on the outcome of a non-UK EuroMillions lottery—for example, a bet on the outcome of the Spanish EuroMillions lottery. Our consultation showed that this has led to customer confusion, with research showing that a percentage of players are unable to distinguish between placing such a bet and buying a National Lottery EuroMillions ticket. Some operators even undercut the National Lottery and advertise products at a lower price than the National Lottery EuroMillions or offer multiple tickets for the price of one. They are able to do this because they do not return a proportion of their proceeds to good causes.

The Gambling Commission has already undertaken a number of measures to reduce customer confusion, and this has resulted in changes to how products are promoted, but even where such proactive steps have been taken we still see evidence of customers unable to distinguish between the two products. A further point of confusion is how players can potentially arrive at these betting websites. It cannot be right that if you want to buy a National Lottery EuroMillions ticket online, and you search for “EuroMillions”, you get a proliferation of sites offering a range of betting services to choose from. Between March and May 2017, the Government consulted on prohibiting betting on EuroMillions. Respondents included lottery operators, beneficiaries of lottery funding, betting operators and members of the public. There were 52 responses and 32 strongly agreed with the proposal that non-UK EuroMillions bets should be prohibited. Not surprisingly, the only respondents to strongly disagree were operators offering these bets.

Betting on the outcome of lotteries is nothing new—it has been offered legally for many years, but not on the National Lottery. For most operators offering bets on lotteries, the product is one element of a wider portfolio. British customers will still be able to participate in the other products offered by these operators, which remain unaffected by this action. Betting on EuroMillions is a growing market, and it is important that we maintain the clear distinction between the National Lottery and other forms of gambling, as set out in Section 95 of the Gambling Act 2005. The effect of these regulations will be to bring non-UK EuroMillions draws in line with the UK draws and prevent gambling operators from taking advantage of the technical way EuroMillions is structured, as individual country draws. More urgently, this action will eliminate customer confusion. For these reasons, I commend these regulations to the Committee.

[Lord Faulkner of Worcester (Lab)]

I am happy to support the regulations. I declare an interest as the chairman of the Alderney Gambling Control Commission and as a veteran of the scrutiny committee on the draft Gambling Act 2005. I recall very well that there were a lot of debates then about whether betting on the National Lottery should be permitted. Our advice was that it should not, for the reasons that the Minister has explained. There has always been a conflict of interest for the National Lottery and the role of the Gambling Commission as its regulator, which remains unresolved. The Gambling Commission—and the National Lottery Commission before it—had the twin objectives of player protection, in ensuring that people did not spend excessive amounts on the lottery and get themselves into difficulty, and the requirement to maximise the return to good causes. As I say, that conflict remains unresolved and will, I suspect, continue to remain so.

The regulations deal with companies such as Lottoland, from which I received a certain amount of unsolicited promotional material. It is based in Gibraltar and offers bets not just on the EuroMillions Lottery but on competitions such as the US Powerball, the Irish Lottery and something called the Bitcoin Lottery. I am not surprised that it opposed the regulations; being able to cash in on the promotion of EuroMillions is a nice little earner for it. Like the Minister, I do not agree that it is right for such companies to do that, so I support the order.

[Lord Clement-Jones (LD)]

My Lords, I thank the Minister for her introduction to the order. It is a pleasure to follow the noble Lord, Lord Faulkner, who took us down memory lane with the Gambling Act 2005. It reminds me that I have been doing this job almost as long, I think, as the noble Lord, Lord Stevenson, which is saying something.

I entirely accept the logic and reasons outlined by the Minister. First, there is the confusion that has clearly been caused. I, too, thought that Camelot’s briefing was pretty cogent on the subject of the damage to the EuroMillions and National Lottery brands in this country. Of course, that has a detrimental effect on participation. It is interesting that Camelot’s research found that only 14% of consumers could correctly identify that buying a EuroMillions ticket via Lottoland —already mentioned—is actually a bet on EuroMillions in a foreign country. Over 60% thought that they were playing EuroMillions the UK. Indeed, I understand that Lottoland’s research found that 28% of its customers did not understand the difference between the two products. That is pretty conclusive.

Secondly, none of the revenue from betting on these lotteries is returned to good causes. That must be a major reason for passing this order. Then there is the fact that Camelot is having to spend quite a lot of money defending its National Lottery brand as a result of all this. That is another reason, so we on these Benches support action by the Government very strongly. This kind of betting on lotteries runs contrary to the spirit and intention of the law, causes customer confusion and harms returns to good causes.

As is ever the case with these orders, it is a very good excuse to probe the Government on one or two other matters. I turn to the relationship between the National Lottery and society lotteries in this context. We know about the success of the National Lottery, which has partly been because of the clear distinction between the National Lottery and society lotteries. A single national lottery has been operated in order to maximise returns to good causes. The economic case for a single national lottery has been examined on many occasions; I think the most recent occasion was when the Gambling Commission advised the DCMS on regulatory policy for the lottery sector. That was in September 2014. It said that,

“the relatively low prizes and generally limited distribution footprint are key factors that have traditionally differentiated the”,

society lottery,

“sector from TNL”—

that is, the National Lottery sector. To make a clear distinction between the National Lottery and smaller, traditional society lotteries, prize and proceed limits exist for society lotteries—as the Minister will know—with the top prize capped at £400,000.

The emergence of national or “umbrella” society lotteries has blurred the distinction between the National Lottery and society lotteries. These larger lotteries are sold and advertised nationally and run by commercial operations. For these reasons, umbrella lotteries stray into the territory originally intended by Parliament to be the sole preserve of the National Lottery through its single national lottery model. Of the current operators in the market, the only umbrella society lottery to offer the top prize of £400,000 is the People’s Postcode Lottery. Increasing the top prize for society lotteries could create, in effect, many more national lotteries, contrary to all economic evidence that a single national lottery is the optimal way to maximise returns to good causes.

After that barrage, my question is: do the Government accept that case and that increasing the top prize for society lotteries risks unbalancing the single national lottery model, putting revenue for good causes at risk, and that therefore there should be no change to the top prize value for society lotteries? I would be more than happy if the Minister wrote to me.