Public Accounts Committee report slams “slow, weak” Gambling Commission and “complacent” DCMS

The House of Commons Public Accounts Committee has today (28 June 2020) published its “Gambling regulation: problem gambling and protecting vulnerable people” report (that you can download below).

In what will add fuel to the fire arising from the Gambling Related Harm APPG’s recent call for a complete overhaul of UK gambling regulation on the ground that “the Gambling Commission is not fit for purpose”, today’s report by the Committee is highly critical of both the Department for Digital, Culture, Media & Sport (“DCMS”) and the Gambling Commission in terms of what it perceives to have been a failure to adequately protect consumers and for the inability to judge the efficiency of the Commission against its stated objectives.

The www.parliament.uk website news item headed “Name and shame betting companies for poor behaviour” (that you can also download below) comments on today’s report as follows:

“Complacent” DCMS and “slow, weak” regulator it oversees lagging behind industry moves and public attitudes to gambling harm; both have “failed to adequately protect consumers”; whole system of regulation needs a “radical overhaul”.

In a damning indictment of the Gambling Commission, Meg Hillier MP, Chair of the Committee, has said:

What has emerged in evidence is a picture of a torpid, toothless regulator that doesn’t seem terribly interested in either the harms it exists to reduce or the means it might use to achieve that. The Commission needs a radical overhaul: it must be quicker at responding to problems, update company licence conditions to protect vulnerable consumers and beef up those consumers’ rights to redress when it fails.

The issue of gambling harm is not high up enough the Government’s agenda. The review of the Gambling Act is long overdue and an opportunity to see a step change in how problem gambling is treated. The Department must not keep dragging its feet, we need to see urgent moves on the badly needed overhaul of the system.

Regulatory failure this comprehensive needs a quick pincer movement to expose the miscreants and strengthen those they harm.

Background

In updates to our 18 April 2020 website posting concerning commencement of the Public Accounts Committee’s Inquiry on this subject (following publication on 28 February 2020 by the National Audit Office of a report entitled “Gambling regulation: problem gambling and protecting vulnerable people”), we reported on:

  • written evidence submitted to the Committee,
  • evidence given on 27 April 2020 – in what was the Inquiry’s sole oral evidence hearing – by Sarah Healy, Permanent Secretary at the DCMS and Neil McArthur, Chief Executive of the Gambling Commission, and
  • a letter to the Committee dated 15 May 2020 in which, on behalf of the Commission, Neil McArthur provided further information in response to questions posed to him during the oral evidence session in relation to the following matters:
    • the impact of the merger between Flutter and Stars Group,
    • the Commission’s fees and fee structure,
    • enforcement actions against operators and licence revocations and surrenders,
    • customer interaction by the industry, and
    • the scale of illegal gambling, how many operations have been detected and prosecuted and how many operators the Commission decided it would not be in the public interest to prosecute.

To add a degree of perspective to the criticisms within the Public Accounts Committee’s report, it should be noted that (a) one of the Committee’s members, Richard Holden MP, is a member of the Gambling Related Harm APPG and (b) his desire to see online gambling face the same restrictions that were imposed on Fixed Odds Betting Terminals is evident from his maiden Parliamentary speech on 23 January 2020.

The report

The report’s opening summary states as follows:

There are an estimated 395,000 problem gamblers in the UK, with a further 1.8 million people ‘at risk’. The effects can have devastating consequences on people and their families, including financial loss, relationship breakdowns, criminality and suicide.

The Department for Digital, Culture, Media & Sport and the Gambling Commission have failed to adequately protect consumers at a time of considerable change in the sector, as gambling increasingly moves online and new games become popular. The collection of evidence has been patchy and behind the curve as the nature of gambling has changed. The pace of change to ensure effective regulation has been slow and the penalties on the companies which do not effectively tackle problem gambling are weak.

More unacceptable is that it is not possible to judge the efficiency of the Gambling Commission against its stated objectives. The Department and the Commission have an unacceptably weak understanding of the impact gambling harms has on people, there is a lack of either detailed measurable targets for reducing levels of harm or an understanding of the impact of any regulatory action, and both have lagged behind developments in the industry, public attitudes and even Parliamentary efforts. Gambling consumers rely on regulation to protect them from harm, including operators that may not always act in the consumers’ best interest. There is a sense of complacency from the department in tackling this issue.

The Gambling Commission, as regulator, must be far quicker at responding to problems and updating licence conditions to protect potentially vulnerable consumers. It must also be more proactive in influencing the industry to treat consumers better, particularly where it has identified potential problems such as during the Covid-19 lockdown. To do this, it needs to radically improve the data and insight it collects to know what is going wrong for consumers and develop better information on its own performance to determine whether it is being effective or not. At present, it has no key performance indicators and the departmental leadership lacks urgency to address this.

The Commission’s ability to protect consumers, particularly children and vulnerable adults, is also fundamentally constrained by inflexible funding and an outdated legal and regulatory framework that can reduce regulatory funding the larger the major gambling firms get. Individuals cannot seek redress for breaches of the Commission’s Social Responsibility Code of Practice through the regulatory system. The government’s manifesto commitment to a review of the Gambling Act is an opportunity to urgently consider not only how these constraints can best be addressed, but also to look more broadly at how efficient and effective regulation of this rapidly growing industry can be better implemented to achieve the stated aims of the Commission and the Department in protecting the vulnerable, ensuring fair play, and reducing criminality.

The Committee’s conclusions and (where applicable) recommendations are as follows (with reference to “Department” meaning the DCMS):

Conclusion 1: Government has a poor understanding of gambling problems and the consequences for people and public services, and therefore of how to target its limited resources effectively.

    • Recommendation: The Department and Commission should write to us within three months and set out what actions they will take to ensure they have the research and evidence base needed to better understand gambling problems, and to design an effective regulatory response.

 Conclusion 2: The Commission’s ability to identify problems and intervene is hindered by its lack of data and insight into the problems that consumers have with gambling operators.

    • Recommendation: In its response to this Committee, the Commission should provide an update on gambling patterns during Covid-19, an analysis of how far the industry has met the 10 commitments, and any regulatory action it has taken against the industry. The Commission should also explain how it will improve the data and intelligence it uses to identify what is going wrong for consumers and to enable it to intervene quickly, including taking advantage of any opportunities presented by big data

 Conclusion 3: The Commission is not proactive enough at influencing gambling operators to improve protections, and consistently lags behind even the industry.

Conclusion 4: The Commission did recently impose a credit card ban on online gambling but does not yet know how effective this will be in reducing gambling harm.

    • Recommendation: The Commission should develop a plan for how it will be more proactive in influencing the industry to treat consumers better, including using reputational tools such as league tables indicating how well each operator treats its customers. The Commission should urgently investigate the impact of fixed odds betting that falls under “lottery” legislation and is accessible by 16 and 17 year olds. The Commission and the Department should urgently look at online fixed odds betting to ensure effective and efficient regulation and report back to the Committee with how they intend to increase effectiveness of online harm reduction within three months.

 Conclusion 5: Where gambling operators fail to act in a socially responsible way, consumers do not have the same rights of redress as in other sectors.

    • Recommendation: The Department and Commission should work together to assess the impact on consumers of gaps in redress arrangements and examine options for increasing statutory protections with an individual right of redress for breaches of the Social Responsibility Code of Practice. In their response to this Committee, they should explain how they intend to resolve these gaps and report back to the Committee on a plan for more effective consumer protection and redress within 6 months.

 Conclusion 6: The Department and Commission do not know what impact they are having on problem gambling, or what measures would demonstrate whether regulation is working.

    • Recommendation: The Department and Commission should develop meaningful outcome measures for problem gambling and associated harms. The Commission should also urgently progress its impact evaluation processes, so it can clearly measure the effect of its interventions and report back to the committee on what it is doing to both assess the impact and effectiveness of the penalties on incidents of problem gambling within three months.

 Conclusion 7: The Commission’s ability to protect consumers is constrained by limits imposed by the legal and regulatory framework.

    • Recommendation: In its response to the Committee, the Department should set out a timetable for the planned review of the Gambling Act within three months. The Department should also set out details on how it will ensure the Commission has the funding and the flexibility it needs to regulate effectively in a legal situation in which currently fewer, larger firms means less funding for regulation.

Reference above to:

  • “the 10 commitments” within the recommendation arising from conclusion 2 is to the “ten pledge” action plan for safer gambling during the COVID-19 lockdown, announced by the Betting and Gaming Council in March 2020;
  • “fixed odds betting that falls under ‘lottery’ legislation” within the recommendation arising from conclusion 4 is – in our view – erroneous if, as we believe to be the case, the Committee is referring to scratchcards (and other instant-win style products) that (under the provisions of section 17 of the Gambling Act 2005) presently fall within categorisation as lottery products.

The Public Accounts Committee’s report appears to point a finger at both the DCMS and the Gambling Commission for the diminishing public trust in gambling which – coupled with the absence of effective self-evaluation criticisms levelled against the Commission in both the NAO report and in this Committee’s report (under the heading “Judging success” on page 12) – might well cause the Commission some embarrassment, given its repeated calls for the industry to considerably improve its own evaluation processes (most notably in the field of customer interactions).

The report might even serve to reignite concern that responsibility for gambling policy and the overall regulatory framework of commercial gambling may be moved away from the DCMS to an alternative government department.

We now await imminent publication of a further parliamentary report, i.e. that arising from the House of Lords Select Committee Inquiry into “the social and economic impact of the gambling industry”.

UPDATES:

1. The Betting and Gaming Council has raised the spectre of “offshore, black market, illegal operators” in its reaction to the Public Account’s Committee’s report. You can read in our subsequent posting here statements made by the Gambling Commission to the Committee on 15 May 2020 concerning “the scale of illegal gambling, how many operators have been detected and prosecuted, and how many operations the Commission decided it would not be in the public interest to prosecute”.

2. A spokesperson for the Gambling Commission has responded to the report as follows:

We are committed to making even further and faster progress to address gambling harms and were already addressing a number of the issues highlighted by the National Audit Office earlier this year. Over the past two years we have strengthened player protection measures, tightened the regulation of the online sector, introduced strict age and ID verification checks, brought in a ban on gambling with credit cards, and been tougher through our enforcement activity. In recent weeks we have also established an Experts by Experience advisory group who will help us to strengthen our efforts and help ensure we make an impact where it matters. We accepted before the Committee that there is always more to do and we are carefully considering the findings of their report to see what other additional steps we can take.

3. Only 6 July 2020, Neil McArthur, the Gambling Commission CEO, wrote to the Chair of the Public Accounts Committee. His letter (that can be downloaded below) states as follows:

Public Accounts Committee report into Gambling regulation: problem gambling and protecting vulnerable people.

Thank you for sending the report to my team on the day of publication and thank you for inviting us to give evidence to help inform the report. We are reading the report in detail and will respond officially within your timetable, alongside DCMS.

We are disappointed to see the report concluded that the Commission has an “unacceptably weak understanding” of the impact of gambling harms and I am writing to you, to reassure you that we are determined to do everything we can to accelerate actions and build on our existing progress in making gambling safer. Since I gave evidence to the Committee we have suspended several operating licences, we have introduced additional measures to protect consumers during the COVID19 lockdown and we are currently taking action on VIPs, customer interaction and online game design. We have also established an interim group of Experts by Experience to assist us develop our plans.

Both the Public Accounts Committee Report and the NAO identified the urgent need for greater resources to be able to meet the challenges ahead and we are working closely with DCMS to address that.

I have the privilege of leading a group of colleagues who are determined to reducing gambling related harm and determined to do everything they can to achieve that. They have shown remarkable resilience and commitment in the face of some formidable challenges and, at times harsh, criticism. I can assure you that we will carefully consider the conclusion and recommendations in the report, as improving the way we regulate is one of our core objectives and learn from criticism we are committed to doing so.

4. On 9 October 2020, HM Treasury published its “Treasury Minutes: Government response to the Committee of Public Accounts on the Seventh to the Thirteenth reports from Session 2019-21”. The first section of those Minutes (that can be downloaded below) constitutes the Government’s response to the “Gambling regulation: problem gambling and protecting vulnerable people” report