British Gambling Legislation: Major Reform on the Horizon

By now most readers will be aware that, after more than 30 years, there is now at least a serious prospect of major reforms to British gambling legislation, which most people agree are long overdue. This follows the publication of the gambling review report on 17 July 2001.

The Review Body was set up by Government early in 2000, as an independent but non political committee with 10 members of varying backgrounds, only one of which, Peter Dean, the Chairman of the Gaming Board for Great Britain, had direct experience of gambling.

This was the first major review of gambling law since Lord Rothschild's Royal Commission published its recommendations in 1978. Most of those recommendations were never put into effect, and there had only been minor changes to gambling legislation in the intervening decades. Meanwhile however, there have been changes to the public perception of an attitude to gambling: in the 1960s it was regarded as a vice of the few which nevertheless had to be tolerated, whereas by the 1990s it had become an acceptable adult recreation enjoyed by many. The popularity of gambling had been vastly increased by the National Lottery, and there have been significant technology developments, such as the availability of internet gambling and computerised gambling machines, never envisaged by the legislation.

The report had therefore been eagerly awaited by the gambling industry since Government announced its review in December 1999, and it is a credit to the Review Body that it was published to schedule, after a great deal of hard work. The report runs to some 256 pages and contains no less than 176 recommendations relating to all forms of gambling.

I make no excuse for not addressing all of the recommendations in the report, or the detail of their effect. Rather the purpose of this article is to highlight the most important recommendations, to set our my views of the effect of those recommendations on the industry and on gambling in Britain generally, and to offer an opinion on how and when they may come into effect.

The aim of the Review Body was plainly to propose a package of reforms that would on the one hand achieve a balance between liberalisation of gambling, with simplified regulation and increased choice for adults wishing to gamble in the competitive market, whilst on the other hand not producing a status society which may be undesirable. There was clearly a concern that a more relaxed approach may greatly increase the number of gaming establishments, raise the number of active gamblers and increase time and money spent on gambling. It was therefore important to reduce opportunities for gambling by younger people, to create tighter controls over those providing gambling facilities and ensure that they provide gambling in a way which is socially responsible.

The resolution of this dilemma was the adoption of the time honoured British approach, namely a compromise, and in my view a sensible one. The Review Body has achieved its aim of balance between freedom and regulation. Few would disagree that an industry that has no commodity other than money needs to be regulated, and operators as well as consumers need to be protected from the infiltration of the unscrupulous. That remains as true today as it was in 1968.

Therefore, the principles that underlined the 1968 legislation remain as relevant in 2001, and it is not surprising that the Review Body decided that they should continue to govern the regulation of gaming. They are: -

1. Gambling should be crime free, conducted in accordance with regulation, and honest.

2. Players should know what to expect and be confident that they will get it and not be exploited.

3. There should be protection for children and vulnerable persons.

It is against the background of those principles that the recommendations are made.

1. A single regulatory authority

To be called the "Gambling Commission" this will take on responsibilities of the licensing of all gambling operators and key workers. It would include all the work presently done by the Gaming Board, but its remit would be extended to other scales of gambling, such as the betting industry. This will achieve better economies of scale, and will also enable the Commission properly to regulate venues where mixed forms of gambling are permitted. Provided it is properly funded, as the report recommends, this is likely to lead to better and quicker decisions, greater efficiency and the opportunity, through the exercise of the wider powers proposed, for the Gambling Commission to build on the work done by the Gaming Board.

2. Enabling Act

The framework of the new legislation will be an enabling act, which will allow detailed provisions to be implemented to subordinate legislation and to codes of conduct issued by the Gambling Commission. The rigidity of the existing legislation has been a significant contributory factor for the failure of the legislation to reflect market and technological changes; for example, to introduce a new game into casinos requires a change of law.

3. Gaming Machines

For the first time, it is proposed that slot machines with unlimited stakes and prizes and random results (i.e. American style slot) should be allowed in Britain. Under the existing law, casinos are restricted to 10 machines per casino with a maximum stake of 50p and a maximum prize of £1,000. It is little wonder therefore that as at 31 March 2001 there were only 814 gaming machines operating in casinos in Great Britain, an average of approximately 7 per casino.

4. Casinos

There will continue to be tight regulation on those operating casinos, to ensure that they are fit and proper to do so. In order to prevent a proliferation of very small casinos, there would be a minimum size requirement, and the number of machines would be governed by the number of tables. Although the 24-hour rule would be abolished enabling immediate entry to casinos, there would be controls on entry with identification requirements and no entry for under 18s. However, there would be major liberalisation. The restriction of casinos to 53 areas would go, as would the present "demand" test, which requires that operators prove substantial existing demand before a licence can be granted. In addition, casinos would be able to offer a wide range of types of gambling, which presently they cannot, and other forms of entertainment, such as cabaret. At present all forms of live entertainment are banned. Advertising in casinos, which is currently very strictly limited, would also be permitted to a much greater extent.

5. Bingo

There would be no limits on the stakes and prizes in games, and rollovers would be permitted, together with the wider range of games. Although the Report recommends that bingo remain a soft game, these are nevertheless substantial changes.

6. Sports Betting

Sports betting shops are subjected to the same sort of demand test as casinos at present, and this would go, together with restrictions on advertising. In addition, betting shops would be able to have 4 jackpot gaming machines and serve food, which presently they cannot. Managers of sports betting shops would need to be licensed by the Gambling Commission, which at present they are not.

7. Lotteries

The National Lottery was not within the remit of the review body, but other forms of lottery were. The Report recommends that the current limits on expenses and prizes should be removed, but subject to the proviso that no less than 20% of proceeds should go to a good cause. There is an anomaly under the present legislation, in that because telephone betting has long been permitted, online sports betting is allowed in Britain, and there are a substantial number of licences being operated.

Casino gaming on the other hand cannot legally be conducted in Great Britain, because the requirements of the Gaming Act cannot be satisfied. The Report proposes allowing online casinos, and recommends that an operator would have to be registered as a British company, with a located server in Great Britain and use a UK web address for the site. The Gambling Commission will establish a portal on its website listing the licensed online providers who would display the Gambling Commission's hypemark.

8. Resort Casinos

This is described in the report as a complex which comprises hotel rooms, restaurants, bars, live entertainment, possibly conference facilities and, most importantly, a range of gambling facilities. There is a proposal to the Review Body from a consorting comprising Leisure Parks Limited, London Clubs International Plc and Blackpool Challenge Partnership to create a resort casino in Blackpool, on England's north west coast, within easy reach of the major accommodations of Manchester and Liverpool. The consortium claim that the success of the project was dependent upon Blackpool having a virtual monopoly within the United Kingdom of this type of facility. Given that the report sought to establish a competitive market in its recommendations, it refused monopoly rights, which in any event would not have been within its terms of reference.

However, there is nothing in the report to prevent not only Blackpool, but other towns and cities establishing resort casinos, and there are a number of identifiable potential sites and locations.

The clearly expressed opinion of the Review Body is that the Report comprises a package which achieves the balance between liberalisation on the one hand and regulation on the other. It follows that they have produced a package which they believe should be implemented as such, although there would be a danger in seeking to cherry pick from the package, because that might upset the balance. Whilst there may well be some changes, following the consultation progress and the deliberations of Government, it is likely that the major recommendations, and those with the most far reaching effects will be implemented. It is likely that there will be single regulatory authority. For casinos there will be liberalisation of the law relating to gaming machines. There will be a significant if not total relaxation of the law in permitted areas. Restrictions on advertising will for the most part go, as will the casino 24-hour admission rule and the requirement for club membership. A new gaming industry will be created in Britain with the granting of online gaming licences, already being granted in some independently governed offshore crown dependencies, such as the Isle of Man and Alderney. I believe these to be the minimum likely changes, but there are also those with most far reaching effects.

It is often the source of surprise, even amazement, for people from other countries to see the contrast between casinos in Britain and those elsewhere, particularly those in the United States. In Britain they tend to be small, some times exclusive quiet clubs with a restaurant, a bar and generally 15-30 gaming tables, but less than 10 machines. There are those in Britain who believe that these are the sort of casinos that the British like, and that any change would be contrary to British tastes. In fact, the reason we have the type of casino in Britain that we do is that it has been produced by the legislation and the attitude of the 1960s, not the other way round. There is no inherent British character trait that dictates that people would be adverse to casinos with entertainment, additional facilities and link slot machines with £1 million jackpots. In fact, it would be likely to lead to a vast increase in the opportunities to provide gaming and therefore in the number of casinos, and in the facilities offered in them.

In 1995 under the existing legislation, Rank Group Plc commissioned research which indicated that a population of just over 100,000 was needed in a casino's catchment area to make it commercially viable. The Gaming Board calculated that if permitted areas were abolished, about 100 new casinos might open. The Board further concluded that if advertising and slot machines were permitted, and if the demand test were also abolished, as now proposed, it would be reasonable to suppose that the number of casinos might double from that number. On this basis, the number of casinos could increase to about 450. Some commentators put the potential figure much higher, and it may therefore be regarded as conservative.

It should also be remembered that under the current regime it is actually quite difficult to find a casino. Until very recently their names could not even appear in a telephone book, and it therefore took a pretty determined gambler to ascertain where to go. With the ability to advertise, with unrestricted access, with live entertainment, there were no restrictions either on the location or number of casinos, they will be limited only by the need for operators to be approved and by commercial considerations.

There is another important factor to bear in mind. The nature and style of casinos, so alien to those in other jurisdictions, has historically made operators from overseas nervous about seeking to enter the British market. The implementation of these important reforms would at a stroke open up a new market for operators from other jurisdictions, and probably particularly those used to providing American style casinos. The increased applications by British operators for themed casinos, and the larger purpose built facilities which have become a feature of new properties has anticipated the implementation of just these sorts of recommendations. Even if I am wrong about the effects of those recommendations, and even if the more conservative estimates the Gaming Board and the Rank Group are wrong; indeed, even if there were only to be a doubling in the number of casinos as a result of the implementation of these recommendations, that would still represent an enormous opportunity for expansion and for overseas companies with experience of just the type of casino that would then be permitted.

So when and how will all this happen? Government have allowed only a relatively short period for consultation on the Report, requiring submissions by 31 October 2001. The Government will then publish its proposals on the report in March or April 2002. These timings may be an indication that the Government intends to act on the Report promptly. However, much will depend upon the urgency with which Government regards these changes, and when legislative time can be made available in Parliament. That is more difficult, particularly since the tragic events of 11 September. The earliest dates for legislation would be October/November 2002.

At a recent conference in London, the Minister responsible for gambling, Richard Caborn of the Department of Culture, Media and Sport, indicated that the Government may act on those changes which can be made by subordinate legislation under the existing Gaming Act, such as the 24 hour rule, numbers of machines in casinos and permitted areas being examples, with major legislation thereafter. This may either be an indication of urgency on the part of the Government, or alternatively an acceptance that major legislation may have to wait. My own view is that we will not see a new Gaming Act until at least early 2003, and if that is right, then what Mr Caborn may have been telling us is that that will not prevent the first important changes being enacted in 2002. Whatever the strict timing proves to be, it is not too long for those interested in establishing in the UK to begin looking at the market now.