Written Ministerial Statement by Minister for Sport Gerry Sutcliffe on gaming machines

25 June 2008

In recent months I have received a range of representations from trade bodies in the gambling industry seeking changes to the regulatory regime for gaming machines established by the Gambling Act 2005 (“the Act”), and implemented by secondary legislation from 1 September 2007.

Through the Act, we have established a comprehensive new system of regulation for gaming machines, with consumer protection at its heart. Our number one priority remains to protect the public, and I have considered the representations we have received with this uppermost in mind.

A number of Hon Members have expressed support for the campaigns led by the Bingo Association and the British Amusement Catering Trades Association (BACTA). I have also received representations from the British Beer and Pub Association, the British Association of Leisure Parks, Piers and Attractions and the British Casino Association. I wish now to report to the House the government’s response.

While the evidence that has been presented from across the industry is mixed, the government recognises that many operators have found trading conditions difficult.

There are likely to be a range of reasons for the current downturn. While the evidence presented to me concentrates almost exclusively on regulatory factors, it attaches lesser or no weight to a range of other plausible factors such as levels of investment in product development, longer term structural and technological changes and wider economic factors. Whilst it is open to government to take action within the framework of the Act, the industry must recognise and find its own solutions to some of these problems.

Representations have also been made to me concerning what were dubbed under the previous legislation Section 16 and Section 21 machines. Whatever the view in some sections of the industry of what earlier legislation permitted, there seems little value in prolonging that debate now. The current legal position is beyond doubt.

The new system of regulation established by the Act, and the strict limits it imposes, were set only after lengthy debate during pre-legislative scrutiny, the passage of the Gambling Bill, and on the relevant secondary legislation. The principal trade bodies, including the Bingo Association and BACTA, played a full role throughout the passage of this legislation, and in the public consultation that preceded it.

I must consider the requests for changes within the new framework established by the Act and agreed recently by Parliament. That framework gives Parliament the final say; it is for the government to decide what proposals should be put to public consultation and then presented to Parliament for consideration.

I have concluded that there is strong evidence that the situation in the bingo industry has been particularly acute. Between 31 March 2004 and 31 March 2007 the number of bingo clubs operating fell from 696 to 634. A further 37 clubs closed during 2007/08, around 6% of the industry.

Colleagues in the House will recognise that bingo clubs fulfil an important social function in many communities. The 2007 Henley Report commissioned by the Bingo Association found that for many people, especially older and retired women, bingo is the main or sole leisure pursuit outside of the home. Despite the range of deregulatory measures that we have already introduced to assist the industry, it is clear that the future of bingo clubs in many communities is under threat.

I am persuaded that a number of other special circumstances apply to bingo. These include the fact that under the industry’s business model there is high demand for machines during short periods of the day, which may impair the fair and open conduct of gambling.

I have also noted two additional points made by the Bingo Association that:

while in recognition of the enhanced social responsibilities imposed by the Act, casinos, betting shops and adult gaming centres (AGCs) received an enhanced gaming machine entitlement, bingo halls retained the same machine entitlement as under the Gaming Act 1968; and,
bingo halls provide a softer gambling environment in which gaming machines are ancillary to bingo.

The Bingo Association has argued that, to help arrest the decline, the number of Category B3 machines (£1 maximum stake, £500 maximum prize) which bingo halls are permitted should increase from four currently to as many as 16. In my view this goes too far. An increase of this proportion would be inconsistent with the precautionary approach that the government has taken to gambling regulation.

Nevertheless I am persuaded that the situation facing the bingo industry is sufficiently grave, and the circumstances surrounding bingo sufficiently distinct, to justify considering whether a smaller increase might be appropriate without jeopardising our principal priority, which remains to protect the public.

For this reason, I have decided to consult on a proposal to increase to eight the number of Category B3 machines which bingo clubs may offer. This enhanced entitlement will only apply to bingo halls which operate a strict over 18s entry policy. If in the light of public consultation we decide to proceed, we will bring forward the necessary Order. This will be for Parliament to approve by means of an affirmative resolution.

I have also been struck by the representations I have received from Hon Members on all sides in support of seaside arcades. Family entertainment centres, which are not permitted to offer high stake, high prize Category B gaming machines, form an integral part of many families’ seaside holidays or day trips. I want to see that continue.

The government has already taken steps to help seaside arcades. In October 2006, in response to requests for assistance from the industry and a year earlier than planned, we increased the stake and prize levels for Category C gaming machines to 50p and £35 respectively. These changes benefited not only seaside arcades, but also pubs, bingo clubs and AGCs, as well as gaming machine manufacturers and suppliers.

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To give the industry certainty and to enable it to plan properly, we made a commitment to review stakes and prizes again in 2009. However, in view of the difficult trading conditions which many operators are now reporting, I have decided on an exceptional basis to bring forward the planned review by one year for the lowest categories of gaming machine – Categories C and D. Category D machines include 10p stake and £5 prize fruit machines, as well as traditional seaside amusements like penny falls and crane grabs.

The industry must recognise that this is a one off. I am mindful of the risk that, coming so soon after the 2006 changes, an early review could perpetuate a view in some sections of the industry that ever increasing stake and prize levels are the only answer to the pressures it faces. This may lead to tensions in terms of the licensing objectives, and act as a disincentive to the industry to explore other ways to freshen its appeal. At the same time, I understand the need for certainty among manufacturers and operators alike on the date of future reviews.

In addition, I am therefore announcing today that I have decided to reinstitute the system of triennial reviews that grew up by custom and practice under the previous legislation. This will mean that, after the 2009 review (part of which I am bringing forward to this year), the next review will take place in 2012.

In view of the priority which the industry attaches to an early review, I am adopting a fast track process. We are writing today to trade bodies, faith groups and others with an interest in problem gambling, to invite submissions on what stake and prize levels should apply for machines in Categories C and D during the period until 2012.

Having carefully considered these submissions, I will formulate proposals and, prior to formal consultation, seek advice from the Gambling Commission on whether any of these proposals raise concerns in terms of the licensing objectives. There will then be a formal three month consultation before any legislation is brought forward. Any changes will be for Parliament to approve, again by means of an affirmative resolution. I intend to complete the consultation with a view to returning to Parliament with any necessary Order in the autumn.

There is no guarantee that this review process will result in increases. It will be for the industry to make that case, and for wider stakeholders to state their views.

I have considered carefully whether the evidence that has been presented would justify extending this early review to high stake, high prize gaming machines in Categories B1, B2, B3, B3A and B4. In particular, I have carefully considered BACTA’s call for an immediate doubling in the maximum stake on Category B3 machines, found in AGCs and bingo halls, from £1 to £2.

A key element of BACTA’s case is that customers have found the Category B3 machine with its £1 stake and £500 prize unattractive, and that this has led in turn to customers migrating from AGCs to play Category B2 machines (commonly known as fixed odds betting terminals) in betting shops. Little in the way of convincing evidence has been submitted to substantiate this claimed migration.

I have consistently made it clear that I view the growing popularity of Category B2 machines and other high stake, high prize gaming machines with concern. That is why in March I asked the Gambling Commission to prioritise research in this area. The aim is to explore the available research which assesses whether there is any evidence:

of causal links between the availability of high stake, high prize gaming machines and the development of problem gambling;
regarding the attraction of these machines to existing problem gamblers;
that existing gambling problems are exacerbated by access to these machines.

Work is already underway and, by the end of July 2008, the Commission will recommend what, if any, further research is needed. The Commission expects to publish the findings from any further work in June 2009.

If evidence emerges that Category B2 machines are a particular problem, I will not hesitate to use the extensive powers under the Act to regulate them more stringently. In the meantime, I have concluded that it would not be appropriate to review stake and prize levels for Category B machines, or to agree to BACTA’s specific proposal, before the Commission’s work is complete and Ministers and Parliament can consider any new findings which emerge. The government has committed to review stake and prize levels on all categories of machine in 2009, and we will make good on this commitment in respect of Category B machines once the Commission has reported.

I have also considered carefully a proposal by BACTA that adult gaming centres – arcades restricted to over 18s found on many high streets – should be permitted to make available Category B3 machines on a ratio of 20% to the total number of gaming machines provided, in place of the current limit of four machines per premises.

I have, however, concluded that this proposal would not provide sufficient certainty about the total number of B3 machines in individual AGC premises, or across the AGC estate as a whole. It could create the potential for larger machine sheds with significant concentrations of high stake, high prize gaming machines in easily accessible high street locations. I am concerned that this could have an adverse impact in terms of the licensing objectives.

I have also considered whether AGCs should benefit from the increased machine entitlement I am proposing for bingo clubs. However, I am not persuaded on the basis of the evidence that has been presented to me that the same exceptional and special circumstances apply. For instance, no evidence has been presented of closures on the scale of those experienced in the bingo industry. In AGCs, gaming machine play is not an ancillary activity, nor is there any clear evidence of unmet demand for such machines.

While I understand that this will come as a disappointment to AGCs, they will of course benefit from any increases to stake and prize levels of Category C machines, which form the bulk of their machine offer.

[Ends]

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