The National Audit Office has today published a report entitled “Gambling regulation: problem gambling and protecting vulnerable people” (that you can download below, together with a summary of the report and the National Audit Office’s press release).
It examines the extent to which gambling regulation protects people from gambling‑related harms and addresses emerging risks. The report’s key facts, key findings, conclusions and recommendations are summarised below.
Our immediate comments
We believe that particular aspects of note arising from the report include:
- The finding that the Gambling Commission and DCMS need to do more to incentivise operators to raise standards and better protect people (including by “incentivising companies to do more to make gambling safer beyond meeting minimum requirements”) which sounds like an encouragement to the Commission to adopt a “carrot” rather than “stick” approach in certain circumstances – something that we have long advocated
- The suggestion that the Commission needs to be more systematic and detailed in recording and analysing information about gamblers to plug gaps in its knowledge, which will no doubt lead to a call by the regulator for further collaboration on the part of UK licensed operators
- The finding that, as a small body, it is unlikely to be fully effective in regulating a challenging and fast-changing industry within the current system even if the above changes are made, which raises a suggestion that the size of the Commission should be enlarged, which in turn would require greater levels of funding
- Comment that gambling regulation does not have features seen in other sectors, such as an ombudsman, with the consequence that the Commission and DCMS need to (a) ensure that gamblers are aware of services to resolve disputes, and (b) review whether these arrangements are working effectively; this is likely to be seized upon in certain quarters during the forthcoming Government review of the Gambling Act 2005 as an argument for reform of the existing ADR system
- Criticism that the way the Commission is funded is not flexible, meaning that it cannot change licence fees to respond to new risks emerging quickly from changes in technology and demand, with the consequence that it and DCMS should review how regulation is funded so they can keep pace with a fast-changing industry; this feeds directly into the arguments by many, including the Commission and politicians that a mandatory RET levy should be imposed, with calls from some for a levy equivalent to at least 1% of GGY (i.e. 10 times the present recommended voluntary RET donation)
- A call for the Commission to articulate (a) what level of reduction it wants to see in the number of people affected by problem gambling, over what period of time this should occur and what would indicate good progress and (b) how it interprets which consumers may be vulnerable and when
- Reference to the view of “industry representatives” that a more collaborative relationship, and more clarity over what the Commission expects of them, would be more effective in raising standards.
The background to the report is described on the National Audit office website as follows:
Around half of adults in Britain participate in some form of gambling. People gamble when they pay to engage in a game of chance and win a prize of monetary value, including in arcade games, online bingo, casinos or betting on sports. Gambling is a major industry in Great Britain, which generated £11.3 billion of yield (bets placed less winnings paid out) for gambling operators, excluding the National Lottery, in 2018 19. The industry also raises around £3 billion a year in gambling duty.
Gambling can have significant adverse effects on people, particularly when it becomes addictive. These effects include mental health problems (which can also be a cause of gambling problems), relationship difficulties, large-scale financial loss and, in some cases, crime or suicide. The level and range of harms experienced differ from one person to the next and can be made worse by poor or negligent conduct from gambling operators, for example by encouraging people to play more. ‘Problem gambling’ is gambling considered disruptive and harmful to a person’s health and well being. Harm from gambling is not restricted to problem gamblers, and can also affect other gamblers, friends, family, co-workers and anyone else impacted by a person’s gambling.
The Gambling Commission regulates commercial gambling in Great Britain. All gambling operators must have a licence, and the Commission has powers to set licence conditions and codes of practice, and to monitor and enforce compliance with these. It seeks to ensure gambling is fair and safe and is guided by a statutory objective for gambling licensing to protect children and other vulnerable persons from being harmed or exploited by gambling. It also has statutory licensing objectives to prevent gambling from being a source of crime and to ensure gambling is conducted fairly and openly, a duty to advise government on gambling regulation, and separate objectives relating to the operation of the National Lottery. The Commission is a non-departmental public body sponsored by the Department for Digital, Culture, Media & Sport (DCMS) and is funded by licence fees from gambling operators.
Content and scope of the report
This report examines the extent to which gambling regulation effectively and proportionately protects people from gambling-related harms and addresses emerging risks, based on established principles of good regulation. It focuses on the role and work of the Commission, but also considers the wider regulatory framework it operates within. It covers whether the Commission:
- has a good understanding of the problems it is trying to address, and has clearly set out what it is trying to achieve, so that it can direct resources effectively;
- is both intervening directly and working effectively with others to make gambling safer, based on a good understanding of what works; and
- has the powers, capacity and expertise it needs to address emerging
- £11.3bn: total gross gambling yield (bets placed less winnings paid out) earned by gambling operators in Great Britain in 2018-19, excluding the National Lottery
- 57%: real-terms increase in gross gambling yield between 2008-09 and 2018-19 (excluding the National Lottery), mostly due to a large increase in licensed online gambling
- 395,000: Gambling Commission’s estimate of the number of problem gamblers in Great Britain, of which 55,000 are aged 11 to 16
- 1.8 million: estimated number of at‐risk gamblers, who therefore may be experiencing some negative consequences
- £260 million – £1.16 billion: indicative range of extra costs to various public services estimated to be associated with problem gamblers
- 44%: proportion of online gamblers that used mobile phones to gamble in 2018, up from 23% in 2015
- 56%: estimated increase in gambling operators’ spend on advertising and marketing from 2014 to 2017, mostly from increases in online and social media advertising
- £19 million: total funding for the Gambling Commission in 2018‐19 (excluding its work on the National Lottery), almost all from licence fees paid by gambling operators
- £19.6 million: total value of financial penalties sanctioned by the Gambling Commission against gambling operators in 2018‐19, up from £1.4 million in 2014‐15
Key findings within the report are the following (with particular aspects of interest in the case of certain of those findings quoted in each of the bullet points below):
- There are an estimated 395,000 problem gamblers in Great Britain, with 1.8 million more gamblers at risk who may also be experiencing harm
- Evidence on the causes and impacts of gambling problems is limited compared with other addictions, such as alcoholism, or consumer issues such as problem debt
- The Commission is clear in describing its overall aim to make gambling safer but has not sufficiently clarified how it is pursuing this aim:
- Regulators need clear, measurable objectives so their teams and the external stakeholders they work with have a common understanding of what they are aiming to achieve and can judge progress. The Commission has translated its statutory objectives and overall aim to make gambling safer into strategic priorities, business plan activities and high-level outcomes it wants to achieve. However, it has not yet developed these high-level outcomes into detailed, measurable success criteria against which to judge progress. For example, the Commission wants to see the number of people affected by problem gambling to reduce significantly but has not articulated what level of reduction, over what period of time, would indicate good progress. It has also not articulated in detail how it interprets which consumers may be vulnerable and when (paragraphs 2.11 to 2.13)
- There are gaps in the data and intelligence the Commission uses to identify the problems consumers are experiencing with gambling services or operators
- The Commission has increased enforcement action against operators that break rules
- The Commission does not know the extent to which these increases have strengthened the deterrent effect of enforcement action (paragraphs 3.10 and 3.11)
- The Commission is not doing as much as it could to incentivise operators to raise standards and make gambling safer
- Effective regulation not only penalises rule-breaking, but also raises standards across the industry both by strengthening the rules where appropriate and by incentivising and supporting companies to go beyond minimum standards (paragraphs 3.8, 3.9 and 3.12 to 3.14)
- The Commission acknowledges that some of its licence conditions and codes of practice have not been effective at making gambling safer and has made incremental improvements since 2015
- The Commission also seeks to prompt industry to raise standards but has not explored common approaches that regulators use in other sectors, such as financial or reputational incentives. Industry representatives we interviewed also indicated that a more collaborative relationship, and more clarity over what the Commission expects of them, would be more effective in raising standards
- The Commission is increasingly proactive in working with other organisations to protect consumers, as its direct role and powers are limited to regulating operators
- The Commission does not have a full understanding of the impact of its work or whether it is achieving its overall objectives to protect consumers
- Regulators need a good understanding of their performance so they can prioritise what works, take corrective action and be held accountable. The Commission generally follows good practice in reporting performance to its board. It reports quarterly a set of indicators linked clearly to its strategic priorities and includes some measures of consumer outcomes, such as estimated numbers of problem gamblers. However, its measures are not comprehensive, are not set against clear benchmarks to indicate overall performance and do not, for example, assess how effectively the Commission’s work reaches consumers most at risk (paragraphs 3.18 to 3.20)
- The way that gambling regulation is funded does not allow the Commission to change licence fees and makes it more difficult to invest in new skills to quickly address changing risks
- The Commission has identified specific skills gaps, including in crypto-currency and addictive technologies, but cannot change licence fees to raise additional resource and also faces more general constraints in reprioritising within existing budgets (for example, due to the specific technical skills required). However, it has not yet produced a robust assessment of future needs or fully explored what more it could do within its existing resources (paragraphs 4.10 to 4.14)
- The Commission’s ability to respond to changes in gambling is constrained by its understanding of how they affect consumers
- The Commission needs this understanding to determine an appropriate regulatory response. The Commission monitors various industry and consumer developments. This has highlighted, for example, an increase from 23% to 44% of online gamblers who gamble through mobile phones between 2015 and 2018, increasing popularity of gambling related to video games by younger people, and a 56% estimated increase in advertising spend from 2014 to 2017 (mostly from online advertising and social media). The Commission has not yet assessed the impact or potential harms of these developments for consumers and has recognised it needs to increase its expertise in digital technologies to be able to respond more quickly (paragraphs 4.3 to 4.5)
- The Commission has taken a cautious approach to changing regulations, and some changes have been made via legislation, which has taken a number of years
Gambling-related harm is a serious problem for the individual affected and people close to them. It imposes potentially significant costs on public services and society more widely, although government has a limited understanding of these impacts. The Gambling Commission is a small regulator in a challenging and dynamic industry. To reduce these harms, it has increased its regulatory action (such as penalties on operators that break rules) and its collaboration with others in the field. But there is more it needs to do to identify where problems are occurring and ensure gambling operators raise their standards.
The way people gamble is changing, with new risks emerging in online and mobile gambling and other technological developments. The Commission’s ability to ensure consumers are protected from these new risks is constrained by factors outside its control, including inflexible funding and a lack of evidence on how developments in the industry affect consumers. The Commission is unlikely to be fully effective in addressing risks and harms to consumers within the current arrangements.
The National Audit Office recommends that:
- the Gambling Commission should:
- build on its high-level definition of vulnerability to articulate clearly how it interprets which consumers may be vulnerable under what circumstances, and how its work is intended to address this. To achieve this, it could work with and learn from the experiences of other regulators that have articulated their interpretations of vulnerable consumers including, for example, how they consider concepts such as temporary vulnerability (such as due to job loss or bereavement)
- do more to translate its high-level intended consumer outcomes into what they mean in practical terms, to help determine progress in achieving these objectives. The Commission should also continue to develop how it measures its performance and impact, including in protecting demographic groups that are particularly at risk of harm, and assessing the timeliness of its interventions and the effectiveness of industry-led initiatives to protect consumers
- enhance its analytical capability to better identify consumer harm and make greater use of the intelligence it has available. For example, it could develop a more systematic and detailed approach to recording and analysing information from consumers who make contact. The Commission should also consider how it can work with other organisations such as local licensing authorities and dispute resolution providers to plug gaps in its current intelligence base; and
- develop a more strategic approach to influencing gambling operators to raise standards in protecting consumers. This could include, for example, considering ways to place financial or reputational incentives on operators to go further in making gambling safer for consumers, including by learning from other regulators
- The Gambling Commission and DCMS should:
- develop a deeper understanding of the causes and impacts of gambling-related harm. This should include the Commission’s own research programme as well its engagement with the wider research community. It could include, in particular, analysis of how social and technological developments affect people’s gambling and the impact this is having in practice, particularly to at-risk groups
- review whether the arrangements for consumers when things go wrong are working effectively. This should include consideration of whether simplifying dispute resolution services would make it easier and more consistent for consumers to access them, and whether it would also provide benefits for the Commission by simplifying the insight and intelligence it gathers and receives on consumer problems; and
- review the suitability of the current licence fee model, and what it means for the regulatory approach, to address the challenges identified in this report and ensure that gambling regulation can adapt to changing risks to consumers. This includes the ability to quickly respond to new areas of consumer harm and, where necessary, increasing capability and capacity to address this. It would also be an opportunity to consider ways licence fees could be used to create financial incentives on operators to raise standards.
UPDATE: Reacting to the National Audit Office report:
The APPG for Gambling Related Harm has issued a press release stating:
Today the National Audit Office has effectively said that the Gambling Commission is not fit for purpose. This is a major intervention by the Government’s own auditor and organisation which holds the Government to account. Individuals at the Gambling Commission should be held accountable for this failing and urgent action must be taken by the Commission to raise standards across the industry, particularly online.
The NAO note that even if the Commission makes improvements ‘it is unlikely to be fully effective in regulating a challenging and fast-changing industry within the current system’. This is unacceptable. We cannot wait years for new Gambling legislation to be introduced.
The Government must immediately bring forward legislation to ensure the ever-growing gambling market it being properly regulated, consumers are protected and an Ombudsman is established. A failure to do this would be an abdication of the Government’s responsibility.
Chair of the APPG for Gambling Related Harm, Labour MP Carolyn Harris, is herself quoted in The Guardian as saying:
The Gambling Commission is not fit for purpose and Neil McArthur [its chief executive] should resign in the light of this report. The Commission is simply not up to the job of regulating the gambling industry, particularly the online sector, parts of which seem to operate like the wild west.