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

Viscount Colville of Culross Excerpts

Wednesday 27th April 2022 Grand Committee

[Viscount Colville of Culross (CB)]

My Lords, I add my praise for the insight and care with which the Select Committee has put together this report. It quotes the Government’s evidence that 0.7% of the adult population of this country are problem gamblers. However, much of this information is self-reported and it is inevitably an underestimation.

I find more convincing a report from HSBC, which investigated the accounts of 1.5 million of its customers to look at their actual gambling spend compared with their disposable income. It concluded that 2% of customers, classed as “Very Concerning”, spend more than 60% of their disposable income on gambling, and 8% spend more than 20% on gambling; these were classed as “Concerning”. These figures not only show the need for the banking industry to become the first responder for these vulnerable customers but emphasise many of the report’s recommendations.

I will focus my speech on the exponential growth in online gambling and the increasing gamblification of online gaming, which is affecting users as young as three. As the noble Lords, Lord Bourne and Lord Kirkham, said, we have seen a huge increase in online gambling, available 24/7 on all sorts of devices, including mobile phones. Researchers’ anxiety is that the fastest growing of these apps are not regulated by the Gambling Commission.

There has been a big increase in what are called social casino apps, which fly below the radar. These include simulated casino games, roulette and slot machines. All involve the original chips or plays being paid for with money, but the rewards are not in money but in tokens that can be used only in the game. One of the most successful is 777 Slots, which allows users to make fast, repetitive slot plays online. The players are nudged into continuing to play and put down stakes, using a software program carefully crafted to excite and engross them. The operators make massive amounts of money, of course, but the apps do not qualify as gambling because, as the Gambling Commission points out in the report, under UK legislation the definition of gambling is that the prize includes “money or money’s worth”. If it does not, it is not gambling. Surely, with the growth of these social casino apps that fall outside this definition, there is potential to cause addiction. The definition has to be changed to create an important extension to the Gambling Commission’s remit.

Nowhere is the revision of the definition of gambling more important than in the world of online gaming. Many researchers talk of the gamblification of the gaming world. In the last decade, it has changed out of all recognition. A decade ago, video games were products to be bought and taken home to be played on a console; now they are given away free as online sales platforms. They lure players into spending more and more money on buying additional benefits in the game to enhance their chances of performing better. Recent studies online show the skilful design techniques that keep players in the game, spending ever greater amounts of money.

This is also happening in the new generation of virtual reality games that are coming through the metaverse, but nothing has attracted as much attention as the loot boxes, which are so worrying because they are accessible to children, especially young males under 18. There is little information about the money being made by the operators, although Juniper Research estimates that the worldwide market is worth $30 billion annually. Young players can buy in-game features that allow them to either spend real-world money or take a stake on in-game items for the chance of winning something of unknown value.

I have read the evidence given to the committee by Dr Zendle—he is the expert on loot boxes—and I have spoken to him at length. He says that loot boxes are similar to gambling in many ways; they provide a powerful gateway for many young people to train as gamblers. They encourage spending, often excessive spending. More importantly, Dr Zendle confirms that, in all his studies, there is a link between problem gambling and spending on loot boxes. His finding is that young people who spend money on loot boxes are more than 10 times as likely to become problem gamblers as those who do not. This rings alarm bells in the report and it should among all of us.

Two Select Committees have already recommended extending the Gambling Act to cover loot boxes and bring them into scope but, in reply to this committee’s report, the Government pointed out that the call for evidence on this issue closed in November 2020. There have been over 30,000 responses. Last summer, the Minister in the other place announced that the government response would come in months. Now we are told that the response will come two years after the consultation has closed—a shockingly long time on this important issue.

I understand that the Government do not want to impose unnecessary regulation on the booming gaming industry, but there are now so many studies and reports to show that loot boxes look and feel like gambling that they should wait no longer. They should urgently ensure that they are regulated under Section 6 of the Gambling Act, as soon as possible.

I ask the Government to look at the bigger picture online as the gambling and gaming worlds collide. They need to take deeper preventive action to deal with problem gambling, particularly among the youngest users. I ask the Minister whether he could look at some of the provisions in the Online Safety Bill, which he will be shepherding through this House. Its duty of care provisions compel larger platforms to take into account the protection of users from harm, both legal and illegal, within the algorithms and software programs which moderate and disseminate content.

This should be the best model for the future of online gaming and gambling. The Gambling Commission’s remote technical standards specify that games should not include features to encourage players to chase losses, nor continue playing when they want to exit the game. Clearly the level of problem gambling in this country means that this is not working effectively. I urge the Minister to consider imposing a duty of care on operators that is baked into the design of games. That would go a long way to alleviating many people’s concerns and, more importantly, would future-proof the technology against the dramatic and unforeseen changes that are coming down the line.