Gaming Machine (Miscellaneous Amendments and Revocation) Regulations 2018

Viscount Younger of Leckie Excerpts

Tuesday 18th December 2018 Lords Chamber

Moved by

[Viscount Younger of Leckie]

That the draft Regulations laid before the House on 15 November be approved.

Relevant document: 7th Report from the Secondary Legislation Scrutiny Committee (Sub-Committee B)

[Viscount Younger of Leckie (Con)]

My Lords, the Government’s response to their wide-ranging consultation on proposals for changes to gaming machines and social responsibility measures, published in May this year, set out a comprehensive package of measures that will strengthen protections around gaming machines, online gambling, gambling advertising and treatment for problem gamblers. The Government made it clear that their intention in the review was to strike a balance between socially responsible growth and the vital endeavour of ensuring that the most vulnerable, including children, remain protected from gambling-related harm.

As noble Lords will know, the headline measure in May was the Government’s decision, following consideration of all relevant evidence, to reduce the maximum stake on sub-category B2 gaming machines from £100 to £2. The decision was met with enthusiasm in many quarters. Local authorities, charities, faith groups, interest groups and academics all submitted opinions in favour of a £2 limit. This House was no exception in expressing its emphatic support for the Government’s intentions. We are here today to discuss and debate the regulations that will give effect to that decision.

Let me turn first to the evidence which led the Government to their conclusions on B2 stakes. Under the Gambling Act 2005, B2 gaming machines have a maximum stake of £100—by far the highest for any gaming machine in Great Britain—and the maximum prize that can be won as a result of a single use is £500. The next-highest limits on the high street are B3 machines, with a maximum stake of £2 and a maximum prize of £500.

Almost 14% of players of B2 machines are problem gamblers, currently the highest rate by gambling activity in England. In addition, the highest proportion of those who contact GamCare, the main treatment provider, identify these machines in betting shops as their main form of gambling. Gaming machines in betting shops also account for one of the highest proportions of all those in treatment for gambling addiction.

In October 2017, the Government published the consultation on proposals for changes to gaming machines and social responsibility measures, which invited views on proposals to reduce the maximum stake for B2 machines. The consultation received more than 7,000 responses and closed in January 2018. The Government published their response on 17 May 2018 and, after giving due consideration to all information and evidence received, they decided that it would be appropriate to reduce the maximum stake for sub-category B2 gaming machines to £2.

In comparison to other gaming machines on the high street, B2 machines are an outlier because of the speed at which it is possible to lose large amounts of money. These machines generate a greater proportion and volume of large-scale losses—for example, more than £500 in a session—and the losses are larger and sessions longer for those who bet at the maximum stake of £100 than for those who play at a lower level.

Even cutting to £10 would have left problem gamblers and those most vulnerable exposed to losses that would cause them and their families significant harm. In particular, the Government noted that more than 170,000 sessions on B2 roulette ended with losses of between £1,000 and £5,000. These sessions persist at average stakes of £5 and £10, but by contrast, none involved average stakes of £2 or below. In addition, the Government considered that the reduction to £2 was more likely to target the greatest proportion of problem gamblers and protect the most vulnerable players, including those in areas of high deprivation.

Having considered these and other factors, the Government concluded that they would reduce the maximum B2 stake to £2. This was supported by the Gambling Commission’s advice that action on B2s should involve a stake limit of between £2 and £30 if it was to have a significant effect on the potential for players to lose large amounts of money in a short time, with any further decrease a matter of judgment for government.

It is fair to say that the date on which these regulations would come into force generated not a little opinion and debate. It was right that those who had strong views and evidence on the issue, including many noble Lords, should have the opportunity to share them. We have said all along that protecting vulnerable consumers is our prime concern, although it has been necessary to take account of the effect that the reduction will have on the gambling industry and those employed by it.

Having conducted the process of engagement with the industry, the Government announced in November that they would implement the stake reduction on 1 April 2019, a date specified in these regulations and which they consider provides sufficient time to allow for relevant changes to be made by industry. Industry has now known about the Government’s intention to reduce stakes to £2 since May this year, and the date announced last month provides further clarity to allow it to continue its preparations.

Noble Lords will also know that the draft Finance Bill was amended so that the increase in remote gaming duty, paid for by online operators, comes into effect in April 2019 alongside the reduction in the stake to cover the negative impact on the public finances and protect vital public services.

I will explain the effect of the draft regulations and the legislative context in which they operate. The Gambling Act 2005 established a new system for the regulation of gambling in Great Britain, with the exception of the National Lottery and spread betting. Section 235(1) of the 2005 Act defines a gaming machine as a,

“machine which is designed or adapted for use by individuals to gamble (whether or not it can also be used for other purposes)”.

The Categories of Gaming Machine Regulations 2007 define four categories of gaming machines, known as categories A, B, C, and D. For the purposes of the 2005 Act, category B machines are divided into sub-categories. These regulations amend the Categories of Gaming Machine Regulations 2007 to reduce the maximum stake permitted for B2 gaming machines from £100 to £2 from, as I said earlier, 1 April 2019. In consequence of this amendment, these regulations also amend the definition of a sub-category B3 gaming machine so that B2 and B3 gaming machines can continue to be distinguished from one another by reference to the different places in which B2 and B3 machines are allowed to be made available.

The regulations also make consequential changes to other secondary legislation, amending the Gaming Machine (Circumstances of Use) Regulations 2007 and revoking the Gaming Machine (Circumstances of Use) (Amendment) Regulations 2015 to remove requirements that no longer apply as a result of the stake reduction.

Millions of people enjoy gambling responsibly, and the Government are committed to supporting a healthy industry, but we need the right balance between freedom and protections. As I have said, the Government’s intention in our wide-ranging gambling review was to strike a balance between socially responsible growth and protecting the most vulnerable, including children, from gambling-related harm.

I want to be very clear that the review and this legislation do not mark the end of government action. We recognise that harm is not about just one product. We will act where there is evidence of harm and we will always keep issues under review, as is our responsibility. We will also continue to work together with colleagues from other departments, such as the Department for Education, to ensure that we are co-ordinated in our approach to young people, and the Department for Health and Social Care, to improve links between gambling treatment and other services. I am proud that the Government are taking forward this decisive measure, and I commend these regulations to the House.

[Lord Foster of Bath (LD)]

My Lords, having campaigned against fixed-odds betting terminals for many years, I am truly delighted that this statutory instrument is now before us, reducing the maximum stake from £100 to £2. The Minister has laid out some of the reasons why this is so important. I do not intend to repeat them, other than to remind the House that there are 35,000 of these machines in our often poorly supervised betting shops around the country, with more than twice the number in the poorest boroughs of this nation than there are in the more affluent boroughs. It is also worth reflecting that research shows that 80% of fixed-odds betting terminal gamblers exhibit problem gambling behaviour at stakes in excess of a £13 spend.

The Minister has pointed out that the Government now accept that these machines have wrecked lives, torn families apart and caused enormous damage in our communities, but I have to say that the tone of the Minister’s introduction rather implied that the Government had been keen supporters of change in this area for a very long time. The truth is that that has not been the situation. It was back in 2010 in the other place that I first advocated a £2 stake, and my noble friend Lord Clement-Jones introduced legislation in your Lordships’ House in 2015 that sought to have the stake reduced to £2. Since then many people have been campaigning for change, including local government, the Church of England—I pay particular tribute to the right reverend Prelate the Bishop of St Albans—mental health charities, academics and many others. The All-Party Parliamentary Group on Fixed Odds Betting Terminals, very effectively led by Carolyn Harris MP, has played an influential role in persuading the Government—eventually—to act as they did on 17 May this year when they announced the cuts.

All of us having welcomed the Government’s announcement that the stake was to be cut, we were collectively appalled to hear that they were proposing a delay in its implementation until October 2019. Despite accepting that FOBTs were a social blight that harmed individuals and communities, they were proposing to wait 18 months, with further suicides being predicted and more lives to be wrecked. We found it hard to believe that the Government seemed to take so much notice of the bookmakers with all their arguments about how difficult it was to change the machines, how much money the Exchequer was going to lose and how many jobs were going to be lost. The Government seemed to fall for it hook, line and sinker, yet every one of the arguments that were made has now been discredited. To take one example, we know that changing the stake will actually be of huge economic benefit to this country. We know that gambling and problem gambling cost this country a fortune: £1.5 billion to deal with the problems that problem gambling is causing us. We also know that because people will spend less money on fixed-odds betting terminals, that money will be spent in other parts of the economy, which is infinitely more productive in helping the economy to the benefit of a significant amount added to the gross value added.

So the Government have at last changed their mind and of course that is welcome, but let us not forget that that was after months of campaigning after amendments being tabled to the Finance Bill signed by over 100 Members of Parliament, the threatened resignation of 12 Parliamentary Private Secretaries and then, very sadly, the actual resignation of the excellent former Minister for Sport and Civil Society, Tracey Crouch, who deserves great credit for the stance that she took. Only after all that happened did the Government agree to do the right thing and bring the implementation date forward to April 2019.

Despite the absurd process that we have had to go through to see the stake cut delivered, I am genuinely pleased to be welcoming the change that is to take place in April next year, earlier than the Government originally planned. However, since the Government began consulting on fixed-odds betting terminals three years ago, a staggering £3.6 billion has been lost by people in this country, often the poorest in our society. For me and for many others, ending the harm caused by these toxic machines simply cannot come soon enough.

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[Viscount Younger of Leckie]

My Lords, I thank all noble Lords for their contributions to this short but important debate, and for the general support for the narrow basis for these regulations from many noble Lords. As the noble Lord, Lord Foster, said, it has been—to put it nicely—rather a long-drawn-out debate on the important area of B2 machines. There has been such consensus about the harm they can do to individuals and communities, which may sometimes obscure the fact that millions of people in this country enjoy gambling safely and responsibly. I will be saying something more about the balance that my noble friend Lord Deben has raised.

I start by paying tribute to Tracey Crouch. I agree with much of the sentiment from across the House today; it is a great disappointment that she decided to resign. She was an effective and hard-working Minister and I have no doubt there will be an opportunity for her to return at some point, although that of course is above my pay grade. I also pay tribute to the right reverend Prelate the Bishop of St Albans, who is not in his place. He has worked tirelessly to raise important issues in this area and I have no doubt that he would have wanted to be here today.

I will answer the questions that have been raised. I reassure the noble Lord, Lord Griffiths, and others that I will also be making a few comments about the future; this is not about just today but about the future as there is still much work to be done.

The noble Lord, Lord Foster of Bath, asked a direct question: why has it taken so long to bring about this change? This question has echoed around the Chamber. I also note what my noble friend Lord Deben said in some sharp comments against this side of the House, which are noted. I have also taken note of the comments of the noble Lord, Lord Lipsey, who put a little of the other side of the argument to imply that the length of time taken to get to this point is not wholly due to—but might have something to do with—the original decision of setting the maximum stake at £100. I do not want to make too much of that point.

I reassure the House that the Government are committed to policy-making that considers all available and relevant evidence. We have consulted widely; we have received thousands of responses and, having considered the evidence, we took decisive action to cut the stake to £2. As I said earlier, I am very proud of the progressive legislation that we are bringing forward today.

The noble Lords, Lord Foster of Bath and Lord Lipsey, asked about the change of date for implementation. We have said all along—as I said earlier as well—that protecting vulnerable consumers is our prime concern, although it was necessary to take account of the effect that this reduction will have on industry and those employed by it or in it. I do not see much sense in going over the ashes. A decision was made; we listened, and we consider that April 2019 allows sufficient time for relevant changes to be made by industry. The draft Finance Bill was also amended so that the increase in the remote gaming duty comes into effect in April 2019 alongside the reduction in the stake.

I will say a little more on this subject because, since the announcement in May, officials have met with the Association of British Bookmakers, and with individual operators. They have also met with the two largest machine manufacturers along with the regulator, the Gambling Commission. Discussions have covered the likely impact on shop closures, job losses, mitigations and the technological changes that will be required. Operators have also had meetings with HM Treasury, Ministers and officials regarding the remote gaming duty. This is where I want to talk about balance because we have to bear in mind that there are a number of jobs involved. We do not agree entirely with these figures; I have said in this Chamber before that more research needs to be done to nail down the precise figures. However, the ABB says that the changes could lead to 4,500 shop closures and 21,000 job losses; there is another side to the argument and it is important to say so.

Other points have been made, notably from the noble Lord, Lord Griffiths, that the industry has known about the Government’s intentions to reduce the stake to £2 since May this year, leaving lots of time to April of next year. The date announced last month provides further clarity to allow it to continue its preparations. We expect the industry to mitigate employment impacts and provide the right support to those affected should it have anticipated any job losses. I reassure the House that officials will continue to work with the industry to ensure that it is prepared for the impacts of a B2 stake limit. This will include mitigating any employment impacts and providing relevant support to individuals affected where there are job losses.

--- Later in debate ---

[Lord Foster of Bath]

On this point, referring to the question asked by the noble Lord, Lord Alton, the Minister is correct to say that the Gamble Aware target is being met, but he will be aware that it is only one of the providers of help and support to people with gambling problems; there are many others which need funding. The reality is that there are 435,000 people in this country with gambling problems. Currently only 2% of them are getting support; clearly more is needed. I hope the Minister will agree.

[Viscount Younger of Leckie]

I agree but I fall back to the point that we still have a considerable amount of research to do. At the moment we are quite content to take the regulatory approach on the voluntary angle. My noble friend Lord Ashton and I continue to keep this under review. If there is a need to legislate, we will have no hesitation in doing so because this is an important area.

The noble Lords, Lord Alton and Lord McCrea, asked whether I agreed with the example of Ladbrokes voluntarily reducing stakes in Northern Ireland. As the House might predict, and as the noble Lord acknowledged, gambling is devolved in Northern Ireland. I cannot comment further except to say that action taken by industry to improve protections and social responsibility measures is very much to be encouraged—

[Lord Alton of Liverpool]

I am sorry to interrupt the noble Lord but might I press him further on commending the decision of Ladbrokes to voluntarily reduce the level of the wagered sum from £100 to £2? Surely it is not unreasonable to say that others in Northern Ireland should do the same; it does not require legislation on the part of the Government to commend that. I do not think it is an unreasonable request to the Minister to think about putting that on the record as a matter of encouragement.

[Viscount Younger of Leckie]

The noble Lord is pushing me. It would be nice to be able to say that but I am not going to be drawn on it. It remains a matter for Northern Ireland to make that decision, and I have gone as far as I wish to go on that point.

However, I promised to talk about the future and I hope to offer some reassurance to the House about the point leading on from this important but rather narrow statutory instrument. We will always need a regulatory system that protects the most vulnerable in our society. The publication of the gambling review did not mark the end of government action. We have an industry regulator with the core responsibility of licensing and regulating gambling to keep it fair, safe and free of crime. We will also work with colleagues from other departments—such as the Department for Education, to ensure that we are co-ordinated in our approach to young people, and the Department of Health and Social Care—to improve links between gambling treatment and other services. We will act where there is evidence of harm, and we will always keep issues under review, as is our responsibility.

Achieving a balance between industry growth and social responsibility needs to be a joint effort between central government, regulators, local councils and gambling companies. As we have discussed, B2 gaming machines are an outlier in the world of high-street gambling because of the speed with which it is possible to lose large sums of money. As I said earlier, there was extensive support for a significant reduction in B2 stakes, and many noble Lords have expressed strong support for the Government’s decision in May.

I mentioned earlier my admiration for the right reverend Prelate the Bishop of St Albans. To reassure the House, I know that he is due to meet my noble friend Lord Ashton and the Minister for Sport and Civil Society, Mims Davies, in the new year to discuss gambling-related issues. I also extend my thanks to my noble friend Lord Chadlington for his continued work in this area. I gather that he has recently held a fruitful meeting with the Secretary of State at the Department for Digital, Culture, Media and Sport, alongside my noble friend Lord Ashton—the ever hard-working Minister—and the Minister for Sport and Civil Society.

I will finish there but will just say that this is an important change. I have listened to the views in the House, going beyond the narrow point of these regulations. We have a chance to make a real difference to the lives of vulnerable people.

Motion agreed.