Awkward Q&A session on affordability and more for the UKGC’s CEO before the DCMS Committee
Just over a year ago, we reported that the cross-party House of Commons Digital, Culture, Media and Sport Committee had commenced a “What next for the National Lottery?” Inquiry to (a) examine the competition process (since then completed by the Gambling Commission) to award the fourth licence for operating the National Lottery and (b) scrutinise the preferred applicant (confirmed on 15 March 2022 as Allwyn Entertainment Ltd (‘Allwyn’), formerly Sazka Group UK 2 Ltd).
On that same webpage, we have reported on what are now four separate oral evidence sessions, the most recent of which was on 30 June 2022, when the following witnesses were called:
Andrew Rhodes, Chief Executive at Gambling Commission and
John Tanner, Executive Director at Gambling Commission
This most recent evidence session followed submission by the Gambling Commission to the Committee of supplementary written evidence (that you can download below) following its announcement that Allwyn was the preferred applicant.
The session included questions and answers relating to:
- the High Court judgment delivered on 29 June 2022, lifting an automatic suspension on the Gambling Commission’s ability to formally award the fourth National Lottery licence to Allywn Entertainment (as reported by us here),
- when clarity might be given whether Allwyn will be running the National Lottery in future,
- whether, if the Gambling Commission is ordered in due course to pay damages of up to £600 million to Camelot, those monies would come out of the ‘good causes fund’,
- when the transitional ‘implementation’ period will commence,
- the basis on which the fourth licence competitors’ bids were assessed and the need to maintain commercial confidentiality during that process,
- the extent to which society lotteries might pose a threat to the duty of the National Lottery operator to maximise returns to good causes,
- whether the Gambling Commission should have a duty to ‘incubate British-based bidders for future competitions,
- the extent to which sanctions introduced following the commencement of the war in Ukraine led the Commission to review its decision on the preferred applicant for the licence,
- the extent to which gambling harms formed part of the assessment for each of the bids,
- advertising of the National Lottery,
- the extent to which the Commission will be able to maintain standards without being more prescriptive in its requirements of the National Lottery operator, and
- concerns with regard to instant-win games and scratchcards (including their association with under-age play and the length of time Allwyn will be allowed to ‘reverse the slide towards instant gambling’.
It can be viewed on ParliamentLive.TV here. A transcript of the oral evidence has been published today (4 July 2022) and can be accessed here.
Within the transcript, one can read answers from Andrew Rhodes to some challenging questions that were subsequently posed by the DCMS Committee regarding (a) the issue of affordability and (b) the manner in which the Commission evaluates aspects of its work as regulator of Great Britain’s commercial gambling industry (with a specific focus on the National Strategy to Reduce Gambling Harms).
We set out below exchanges that took place on both topics between the Committee’s Chair (Julian Knight MP) and the Commission’s CEO.
Chair: To cover some other areas with you while you are here, we have the gambling White Paper due to be published very soon. Rumours are it could be just days away. One idea that has surfaced in recent times in relation to the White Paper relates to affordability checks—for example, consumers potentially having to submit bank statements or tax returns to bet as little as £100 a month. In November 2020 you did a consultation on the effects of that; why didn’t you release that consultation?
Andrew Rhodes: That would be a little bit before my time. We have recently released the results of consultation on customer interaction. We have agreed with DCMS that the issues around affordability checks are something for the White Paper. We originally anticipated that the White Paper would be a little earlier than it has been, so we have wrapped our work into the White Paper. That is my understanding. We have, however, published recent guidance that takes effect in September around customer interaction, which is not quite the same, but involves the operators making sure that their customers are intervened with if they are showing any signs of harm, particularly in terms of the frequency and times of play. It is not always the amount that people gamble with, but sometimes the frequency and pattern of play, particularly in the small hours of the morning and extended periods of play without breaks. That is something that we would be concerned about and that is in the guidance. We expect statements on what the Government would like to see on affordability checks, if that is part of the White Paper, to be covered by the White Paper, and that is what we have agreed to do.
Chair: To clarify, your consultation that took place in November 2020 was supplied to DCMS and it has informed the White Paper—is that correct?
Andrew Rhodes: That is my understanding. We have submitted our own advice on the White Paper to DCMS, which will be published after the White Paper is published.
Chair: You have no firm plans to consult again on affordability?
Andrew Rhodes: If affordability checks are part of the White Paper and that is an action given to the commission, then there would be a consultation on what form those should take and what levels they should be at.
Chair: It does seem to be very strange that you should announce a consultation in November 2020 on such an important area, which frankly does need scrutiny more widely than just DCMS and the Department, and that was not released publicly. I thought that would be of interest to parliamentarians, rather than for it just to be handed covertly to officials at DCMS. That seems a very strange approach and lacking in transparency, frankly.
Andrew Rhodes: I was not at the commission at the time, so I am very happy to look at what the reasoning was for it not being published. My understanding since I have joined the commission is that we have fed into the White Paper that affordability checks will be considered as part of the White Paper’s recommendations, rather than have essentially two bites at that.
Chair: Yes, but do you agree, Andrew—I do take the point that it was before your time, but you are now in charge of the organisation—that this feeds into a general feeling that the commission is not public-facing enough, that we do not get enough, either as policymakers or as the general public, in terms of the work that you do? This is important work. Affordability and affordability checks are of great public interest. It seems to be very strange that this has not been made publicly available. I do not know what is so secret about it that it needs to be handed over covertly to DCMS and then inform the White Paper. We have a right to see it as well and so does the general public, because we pay for you.
Andrew Rhodes: I take your point entirely. As I said, I am not familiar with the reason why it was not published at the time it was completed. It predates me …. I am very happy to look at that and write to you on it. In terms of transparency, there are a couple of things I would say there. We consulted on customer interaction and we have published that. That was publicised quite widely in most recent weeks. We publicise all our activity in relation to action taken against operators, including on the National Lottery. Every quarter we publish official statistics on the prevalence of and participation in gambling. We recently published our pilot work on a new participation and prevalence study, which drew criticism from parts of the industry and drew praise from others. We felt it was the right thing to do to publish it. Some wanted us not to because it is not yet at the standard for official statistics, but we felt it was better to publish what we had done so far and we had committed to do so.
For the benefit of readers who may be unfamiliar with the Gambling Commission’s 2020 plan to require licence-holders to conduct defined affordability assessments at thresholds set by it, more information can be found in our November 2020 website posting entitled ‘Affordability at the fore of the UKGC’s Remote Customer Interaction Consultation & Call for Evidence’.
The National Strategy to Reduce Gambling Harms
Chair: Let us look at the National Strategy to Reduce Gambling Harms. I think you have overseen £40 million in voluntary settlements in that respect to support that national strategy. What assessments do you make of the efficacy of that £40 million investment and how public is that?
Andrew Rhodes: It is all published on our website—any regulatory settlement that we have awarded. They are awarded typically to charities, research organisations and those dealing with the effects related to gambling harm.
Chair: The information is publicly available as to who you have given the money to, but what is not publicly available is exactly what metrics you have decided to use to see if that money has been used wisely. That is not publicly available.
Andrew Rhodes: No. We have published who it has gone to, but not an evaluation.
Chair: So £40 million just goes out the door. You give a list on your website of where that money goes to and we have no idea exactly what metrics you are going to use to see that that £40 million is used wisely.
Bringing back memories of criticisms levelled at the Gambling Commission by the National Audit Office in February 2020 and the Public Accounts Committee in June 2020, the exchanges continued as follows, revealing in the process (amidst a number of mixed messages) an acknowledgment from the Commission’s CEO that:
- “the headline rates of gambling harm as measured as an official statistic have been falling – that is a good thing” and
- “standards are undoubtedly rising, but there is more that we should do”.
Chair: What metrics do you use to decide whether the National Strategy to Reduce Gambling Harms works? What metrics internally do you use?
Andrew Rhodes: We look at quarterly data around participation and prevalence around gambling. Our work around the National Strategy to Reduce Gambling Harms has highlighted that research is probably not robust enough. It is telling us what the trends are, but it is not telling us enough about the wider impacts of them. We think there is under-reporting . It is not necessarily that we think that the quantum is worse than it was, but the strategy and the work that we have done suggests that there is underreporting here. That is why we have launched the pilot and that is why we have made a financial commitment over the next multiple years in our budget to carry on that work, because we think understanding the level of harms and the wider effects is very important.
Chair: Forgive me, but that seems very slipshod, the idea of this money going out the door and effectively all you do is list the participants in the scheme—the people who are getting the money. I take your point that you go through a rigorous programme—I would not suggest that you do not—to make those assessments, but then you do not seem to have any quantifiable metrics to understand exactly what effect that has had in the wider public. All you have, seemingly, are generalised statistics that would be available anywhere. There is nothing there to say that what you are doing as an organisation has made a blind bit of difference to the public good. There is nothing you can point to.
Andrew Rhodes: The headline rates of gambling harm as measured as an official statistic have been falling. That is a good thing. We are open that we think there is more work to be done to understand the wider effects around gambling harm. We have taken very robust action in relation to several operators to drive up standards. Standards are undoubtedly rising, but there is more that we should do. I am happy to say I am not personally aware of the exact metrics that are used today to measure the regulatory settlements that we have given.
Chair: Are there any metrics?
Andrew Rhodes: I would need to write to you on exactly how we measure them.
Chair: I am sorry, I am a little bit bemused by that fact. You can’t tell me whether there are any metrics whatsoever in the organisation to say whether the £40 million that you spend has done any good whatsoever, apart from a general public health figure—is that correct?
Andrew Rhodes: I know that we have funded several programmes that have done very good work. I am not personally able to tell you today exactly how that has been measured, but I am very happy to write to the Committee with the detail that we have and how those are being used.
Chair: Do you have any measures or metrics in place to decide exactly how you are trusted by your licensees, for instance? Is there an overarching survey of that?
Andrew Rhodes: Not presently, no. There isn’t.
Chair: What do you do? There seems to be money going out the door and no accountability for that money, apart from when you make the award. This money just splashes out there and you have no idea in terms of what this impacts with the licensees. I am struggling to think precisely as an organisation how you are doing your job, because these seem to be key measures and indicators of whether you are successful.
Many might conclude that whilst the Commission’s CEO was well-prepared to give evidence on the National Lottery Licence competition, he was taken by surprise with a wholly separate line of questioning unrelated to that specific issue. It will be interesting to read in due course the letters that he has promised to send to the Committee addressing questions that he was unable to answer in detail during the evidence session.
You can download below a copy of a letter dated 14 July 2022 from Andrew Rhodes, addressed to the Chair of the DCMS Committee, the key parts of which read as follows:
During our discussion, I committed to providing further contextual information on several subject areas, and have done so below.
Restrictions on 16 and 17-year-old players
We talked about the restrictions on 16 and 17-year-olds who, as you know, were permitted under legislation to play the National Lottery until recently.
The legislation, which increased the age limit to 18, came into effect in December 2021. However, Camelot – as the current operator – voluntarily increased the age limit in April 2021, ahead of the implementation of the legislation. Since April 2021, 16 and 17-year-olds have been unable to play National Lottery games via any channel. However, existing online accounts remained open until 30 November 2021, enabling users to claim outstanding prizes or withdraw funds. The only variance to this was for those who turned 18 during the period between April 2021 and December 2021; at this point they would have been able to re-commence play. In understand the former Minister for Tech and the Digital Economy provided a similar clarification at the oral evidence session on 5 July.
Publication of society lotteries data
The Committee enquired about statistics relating to the society lottery market. The production of the most recent industry statistics for the period April 2020 to March 2021 was affected by the impact of Covid-19, the lack of, and quality of, data submissions from some operators, and resource required for the consequential quality assurance. Therefore, the latest publication only contains figures for remote casino, betting and bingo, the National Lottery, and the numbers of operators and licences held for the period between April 2020 to March 2021. We have already announced that targeted regulatory action around industry data submissions will feature in our business plan for 2022 to 2023.
However, I can confirm that we expect to publish a revision to the November industry statistics later in the month, which will include the relevant data for society lotteries.
The National Strategy to Reduce Gambling Harms
The National Strategy to Reduce Gambling Harms was an important tool for collaboration between various organisations with a role in reducing or preventing gambling harms, particularly statutory or public bodies. Each organisation that contributed to the strategy has its own metrics for success, or reporting progress. We developed metrics and a programme of research, statistics and evaluation which together continue to deepen our understanding of gambling harms and the impact of work in reducing those harms.
Regulatory settlements are a possible outcome of our enforcement action, and this may include a financial amount paid by the operator for socially responsible purposes. It is important to note that the Commission does not handle the funds. We do, however, approve the destination of those funds. It is a requirement of any regulatory settlements that evaluation must be built into the proposals. As part of our process for reviewing proposals, we consider two important aspects: whether there is sufficient oversight for the programme of work, and whether there are processes in place for evaluation of the project. Therefore, at the point of making a decision on whether a proposal meets the criteria for a settlement, the Commission assesses whether there is a process for metrics and evaluation.
We consider it appropriate that the organisations who deliver the projects retain oversight and responsibility alongside their relevant standards or regulatory bodies. This avoids duplication of governance and oversight, and ensures that the Commission is focussed on delivering its own regulatory roles.
New rules to protect consumers at risk of harm
The Committee was interested in the outcome of our consultation on remote customer interaction and our call for evidence on affordability.
In 2020, we conducted a consultation on the steps operators should be required to take to identify customers at risk of harm, and the action they should take as a result. This sat alongside a call for evidence specifically about the affordability and financial assessments that operators should conduct. We received approximately 13,000 responses to the consultation and call for evidence.
Following the consultation, in April this year we issued new rules requiring online gambling businesses to do more to identify and take action to protect consumers at risk of harm. These stronger, more prescriptive, rules – alongside new guidance – will come into effect on 12 September 2022. Full details of this announcement are available on the Gambling Commission website.
In relation to affordability, we will consult further on more prescriptive requirements related to the three key financial risks which emerged from the call for evidence and our casework: significant unaffordable losses over a short period (binge gambling); significant unaffordable losses over a long period; and customers who are particularly financially vulnerable. This is a policy that requires careful consideration of the balance between consumer protection and the need for consumer privacy and freedom, which is why we want a full and proper debate and consultation process. We intend to launch this further consultation later in the year.
I hope that the information above, in addition to the evidence we provided at the session, will be useful to the committee as it moves to the next stages of the inquiry.
The Commission’s priority is to implement the outcome of the competition to ensure a seamless, and timely, transition to the next licence, for the benefit of participants and good causes. We will, of course, endeavour to keep you apprised of any significant developments.