House of Lords Select Committee on the Social & Economic Impact of Gambling Industry

Gambling Harm – Time for Action

Introduction

The House of Lords Select Committee has published its long awaited report on the Social & Economic Impact of the Gambling Industry – which has been delayed by the prorogation of Parliament (twice) and by the covid-19 pandemic.  This article does not attempt to analyse the Report in any detail. I have simply highlighted some of the more eye-catching discussion and recommendations which seem to me, on a first reading, to deserve immediate comment.

Summary of Report

The bottom line of the report is that gambling is potentially “toxic” (the Committee’s word) and that not enough is being done to redress its adverse effects.  The opening paragraphs of the Summary to the report sets the tone:

One third of a million of us are problem gamblers. On average, one problem gambler commits suicide every day.

The young are most at risk:

• • 55,000 problem gamblers are aged 11–16;
  • for girls aged 11–16, the rate of problem gambling is twice that of any other female age group;
  • for boys, the rate is three times the rate for adults;
  • for all of them, gambling is illegal, yet such efforts as the industry makes to prevent it are altogether unsuccessful.

The harm goes wider: for each problem gambler, six other people, a total of two million, are harmed by the breakup of families, crime, loss of employment, loss of homes and, ultimately, loss of life.

The liberalisation of gambling (the backbone of the 2005 Act) and the “almost universal adoption of the smart phone and other devices”  to enable totally unsupervised gambling are given as the two factors which, taken in combination, answer the Committee’s question: “How did we get to this state?”  The state referred to being –

Gambling operators have made hay exploiting the laissez faire regime that has existed hitherto, while successive governments and regulators have failed to keep up with the revolution in the UK gambling sector. Our report demonstrates the wholly reactive nature of regulation since gambling was liberalised. The unscrupulous methods and ingenuity of some gambling operators makes for shocking reading. Their tactics are to change their working methods just enough to avoid more regulation being imposed on them from outside; and to date that has worked well. This cannot continue.

The Committee makes over fifty recommendations, some of which are unlikely to be given an enthusiastic welcome by the gambling industry,  which the Commission believes “will begin to address the misery that a gambling addiction can visit on individuals and their families and friends”.  Strong words.

The Gambling Commission

A principle target of the committee’s criticisms is the Gambling Commission.  The committee heard evidence from a number of problem gamblers who had self-excluded but been tempted back into gambling by operators. The committee said:

Fines currently imposed and penalties agreed by the Gambling Commission do not make a sufficient impact on large corporations. They should reflect not just the seriousness of the offence but the size of the offender. In the case of repeat offences or other extreme circumstances the Commission should demonstrate much greater willingness to exercise its power to withdraw an operator’s licence. (Paragraph 227)

An extremely important recommendation is the reversal of the burden in the ‘aim to permit’ requirement.  It is currently mandatory for the Gambling Commission to aim to permit gambling, in so far as the Commission thinks it reasonably consistent with the pursuit of the licensing objectives (section 22(b) Gambling Act 2005). The select committee recommends a fundamental amendment:

Section 22 of the Gambling Act should be amended as follows:

paragraph (b) should be amended to provide that the Commission should not permit gambling unless it believes that to do so will be consistent with the licensing objectives;

a new paragraph should be added making the identification and prevention of potential and actual harm a third aim of the Commission. (Paragraph 205)

Licensing authorities

The committee recommends a parallel (and far-reaching) amendment to the powers of licensing authorities when deciding premises licence applications. Citing from the representation made by the Local Government Association, the Report says (paragraph 256):

“Due to the statutory ‘aim to permit’, licensing authorities are unable to prevent the opening of certain gambling premises in their areas even if they feel that they are already saturated with them. There should be more local flexibility within the Act for democratically elected councillors to make such decisions if they can be shown to be in the interests of the local economy and community.”

257.Leeds City Council were keen to have more local autonomy:

“The Council would welcome more control, such as the ability to control numbers in a given area, for example in the same way as cumulative impact areas work for the Licensing Act 2003. This would prevent the proliferation of any single type of gambling premises in an area—such as betting shops, AGCs or bingo halls, which not only have an impact on the local high street but also seem to accumulate in deprived areas. The Council would also welcome the ability to incorporate local conditions and requirements into the Statement of Licensing Policy to control matters such as single staffing, window displays, visibility of gaming and gambling machines, etc. to promote the protection of children and vulnerable people.”

258.Gerald Gouriet QC expressed similar views:

“It is something of a myth that giving the licensing function to local authorities has resulted in ‘local licensing control’. The control that most licensing authorities would like to exercise is the refusal of a licence for a betting shop or adult gaming centre on the simple ground: “the local community doesn’t want it”. Licensing authorities do not have that power—although licensing justices under the repealed legislation did. Even if (as is frequently the case) substantial numbers of local people strongly object to the grant of a new licence for gambling premises on the perfectly rational ground that the high street already has enough of them and the local community doesn’t want any more, that is not a lawful ground for rejecting an application made in accordance with the 2005 Act.

259.We agree. We accept that to give local authorities such a power in respect of the licensing of premises for gambling would be a reversal, not only of the general “aim to permit” philosophy which underpins the Act, but also of the prohibition on licensing committees having regard to “the expected demand for the facilities which it is proposed to provide.” It would not however be inconsistent with the Budd report which, having recommended the abolition of the demand test, went on to say: “We recommend that in determining whether the location for gambling premises is appropriate the local authority should have regard to the general character of the locality and the use to which buildings nearby are put.”

260.We believe such a change would be justified. The interests of the operators should not be the only significant factor in a decision on where a betting shop is located. Local authorities should be able to decide not just on the basis of “what is good for the punter”, but what is good for the community as a whole. In this respect licensing committees should have the same powers as they do when licensing premises for the sale of alcohol.

Funding of Gambling Commission

Notwithstanding its criticisms of the Gambling Commission, the Select Committee recommends that it should be better funded:

The Government should work with the Gambling Commission to devise a new funding structure in order to provide it with more flexibility and allow it to react and adapt to fast changing regulatory requirements. (Paragraph 201)

Protection of children and the vulnerable

The social and economic impacts of gambling being the main focus of the Committee’s report, the protection of children and the vulnerable – and the current deficiencies in that regard – are discussed in detail, and a number of important recommendations are made. I will take those in a separate paper, but two deserve a mention here:

(1) Gambling Industry Duty of Care to Players

The Select Committee recommends the establishment of a statutory duty of care owed by the gambling industry to customers who self-exclude (and, it would seem, customers generally):

The law should be amended to make an operator who contravenes provisions of the licence conditions and social responsibility codes liable to an action for breach of statutory duty at the suit of a customer who has suffered loss as a result of that contravention. (Paragraph 389)

In my written evidence to the Committee I remarked:

The difficulty is finding a fair balance: self-excluded problem gamblers who gamble while excluded and win tend not to kick up too much of a fuss. A scenario might unfairly be created in favour of the self-excluded gambler, in which he can recover his losses in an action of negligence against one operator—whilst holding onto his winnings from another.

The Report countered with:

We accept that this is a possibility, but have little sympathy with an operator who has to pay winnings when the reason for this is simply his own failure to give effect to a self-exclusion agreement.

With respect to that observation, the issue is not not so much doing the right thing by the gambling industry (and I regret using the word “fair” in my evidence) but that the problem gambler will have every inducement to continue gambling if he is handed such a “win-win” scenario.

(2) Increase in Minimum Age

(2) The Committee also recommends that the minimum age for gambling is increased to 18:

The minimum age at which an individual can buy any National Lottery product should be raised to 18. (Paragraph 461)

44.The minimum age at which an individual can take part in any online gambling should be raised to 18. (Paragraph 473)

The full report can be accessed here

The House of Lords Select Committee Report on the Licensing Act 2003 can be found here

 

Gerald Gouriet QC

Francis Taylor Building

2 July 2020

 

Gerald Gouriet is joint editor of Smith and Monkcom: The Law of Gambling