UK Government responds to House of Lords Select Committee Gambling Industry Report

As was indicated would be the case in the UK Government’s press release of earlier today (8 December 2020) relating to the launch of its Review of the Gambling Act 2005, the Department for Culture, Digital, Media & Sport has now published the Government’s formal Response to the House of Lords Select Committee’s Report on the Social and Economic Impact of the Gambling Industry (on which we have previously reported here).

You can download below the full Response document. You can also read here our Guide to the Gambling Act Review (with details of its Terms of Reference and the accompanying Call for Evidence).

Of direct relevance to matters that fall for consideration as part of the Gambling Act Review, we are quoting below particularly salient aspects of the Government’s response to various recommendations within the Select Committee’s Report. In so doing, where appropriate we have added comment of our own in green.

Offline gambling

  • In reviewing the Gambling Act 2005 to make sure it is fit for the digital age, we will consider the evidence on whether additional measures at the product, or account, level are now required for online gambling products. We also want customers to be protected wherever they are gambling and so a primary objective of the Review of the Gambling Act will be to ensure an equitable approach to regulation across different types of operators. [This could be regarded as an indication that the Government is looking to align online staking and prize limits with those applicable to land-based gambling]
  • We agree that the time is now right to examine how the entitlements and requirements introduced for casinos in the 2005 Act have supported the government’s objectives. The Gambling Act Review provides an opportunity for us to do this, and to consider next steps for casino regulation more widely. [This raises the possibility of an adjustment to gaming machine entitlements within British casinos]
  • The government agrees that adequate supervision by trained staff is an essential regulatory control for betting premises.

Online gambling

  • We regard the question of protections around online gambling to be a central issue for the Review of the Gambling Act.
  • We recognise that the more we tighten the regulation of the licensed sector, the more we need to ensure we have the right measures in place to prevent the black market moving in. We are … seeking evidence on the extent and risk of the black market in our consideration of the Gambling Commission’s powers through the Gambling Act Review. [This represents a key issue, bearing in mind the online sector’s longstanding argument that a grave danger will exist that, if regulation is ‘over-tightened’, the aims and ambitions of such a reform will be frustrated by increasingly large numbers of online gamblers removing their business from UK licensed operators to illegal unregulated black market operators, most of which would provide no consumer protections at all. To date, such an argument has been ‘played down’ by the Gambling Commission]

Gambling Commission

  • As part of the Gambling Act Review, we are looking at whether the regulatory system is delivering our objectives, particularly calling for evidence on whether the Gambling Commission’s powers of investigation, enforcement and sanction are sufficient to effect change in operator behaviour and raise standards across the industry, or if there is scope for the Commission’s existing powers to be used differently or more effectively to that end. [Notwithstanding, the harsh criticisms levelled by various Parliamentarians against the Gambling Commission in recent months, this comment points more towards the potential for greater powers (and, correspondingly, greater funding) for the regulator than replacement of the Commission with a wholly new regulatory body, as has been urged by some]

Licensing of affiliates

  • We have concerns about the potential for a move to licensing affiliates to reduce operator accountability for the actions of their affiliates, but encourage licensees and the affiliate industry to continue working together to raise standards. [This comment displays little enthusiasm for introduction of a licensing regime for affiliates, instead maintaining the current regulatory position whereby licensed gambling operators are liable for the activities of their affiliates]

The house edge

  • Research commissioned by GambleAware identified better communication of concepts such as house edge, return to player and game volatility as a key area for improvement in order to aid player understanding. That study also observed that players often struggle to understand ‘industry jargon’ and associated mathematical concepts. Further consideration is being given to identify the metric or range of metrics that would best inform consumer decision making.

Regulation by local authorities

  • In addition to the impact of the stake cut to B2 gaming machines in betting shops, the entirety of the land-based sector has been affected by the impacts of Covid-19 and the long term consequences of this are not yet known. [It is unclear whether this comment should be taken as indicating any keenness on the part of the Government to consider reforms that might assist the land-based gambling sector to recover from the adverse economic effects of the Covid-19 pandemic]
  • The government is keen to understand more about the immediate and long term effects of these changes. We will seek views from licensing and local authorities on what, if any, changes they want to see made to their powers, and consider these alongside any evidence they can provide to demonstrate the necessity for these changes. The Gambling Act Review will also consider the balance between online and land-based gambling to make sure we have an equitable approach to the regulation of different types of operator. [As indicated above, this could be regarded as an indication that the Government is looking to align online staking and prize limits with those applicable to land-based gambling]

Gambling related harm

  • We agree with the Committee that a robust evidence base is essential to effective policy making and regulation, and in order to make progress in this area we are working with experts to develop a model that delivers the data and insights we need to more fully understand gambling in Britain. [The industry should be reassured by the Government’s specific reference to a “robust evidence base” being essential for effective policy making and regulation, and it is to be hoped that this requirement will be firmly borne in mind by all participants and decision-makers throughout the Gambling Act review process]

A health issue

  • Protecting children and vulnerable people from gambling-related harm has long been a priority for government. We have already delivered on our manifesto commitment to ban gambling on credit cards and, despite the pressures Covid-19 has placed on the government’s resources, have now announced the wide scope of the Review of the Gambling Act 2005. [Surprisingly, the Government is claiming credit for the ban on use of credit cards for online gambling, even though the decision in that respect was – at least as we have understood it to date – that of the Gambling Commission following a consultation conducted by the regulator]

Suicide

  • We continue to work towards improving our understanding of the link between suicide and gambling.

Affordability checks

  • As part of the Review of the Gambling Act, we are seeking evidence on the case for further controls on online gambling accounts, including those based on affordability. However, we are not waiting for the Gambling Act Review to take action in this area. The Gambling Commission is, as recommended by the Committee, already consulting and calling for evidence on proposals to strengthen requirements on licensees to identify and interact with customers who may be at risk of harm. [The Commission’s current Remote Customer Interaction Consultation and Call for Evidence (running until 12 January 2021) proposes that affordability checks will become much more demanding, including a requirement for mandatory affordability assessments to be conducted on customers within all remote gambling sectors at financial thresholds set not by operators, but instead by the Commission. Those thresholds could conceivably be as low as £100 loss per calendar month, which has raised the question whether it is constitutionally wrong for such a fundamental policy change affecting personal freedoms to be considered otherwise than in Parliament as part of the government’s Gambling Act Review. The above comment by the Government appears to confirm suspicions by some that the Commission’s proposal is already a ‘done deal’ and will not not fall for consideration and determination instead by Parliament).
  • The Gambling Commission has challenged the industry to develop solutions to enable protections for players to be applied across different gambling companies. Building on the implementation of self-exclusion across all operators, this is a step that would enable customer interaction to be based on information about activity across all online operators …. Where the industry fails to develop satisfactory solutions, the Gambling Commission will mandate measures to deliver the outcomes required. [Satisfactorily addressing issues arising from laws on privacy and data protection are key to finding a solution to this issue (as is clear from ‘single customer view’  initiative) so, as matters stand, it is unclear what measures could be mandated by the Commission “to deliver the outcomes required” until such time as those issues have been satisfactorily addressed between the Commission and the Information Commissioner’s Office] 
  • The government believes that the financial services sector has an important role to play in helping people monitor and manage their gambling spend. In February 2019, the Secretary of State for DCMS convened a roundtable of representatives from the financial services industry to discuss what more banks could be doing in this regard. We are pleased that following these conversations, a number of banks have rolled out gambling transaction blocks to their customers. [All within the UK’s gambling industry should press for more widespread responsibility to be adopted by the financial services sector in helping people to monitor and manage their gambling spend]

VIP schemes

  • Should the industry fail to make significant improvements on the back of the new rules, the Commission has been clear that there remains scope for further restrictions. In addition, the government is seeking evidence on the harms and benefits of operators’ ability to provide customers with promotional offers, bonuses and other incentives – both within and separately from VIP schemes – to inform the Review of the Gambling Act. [This comment comes as no surprise which reinforces the need for all UK licensed operators to manage their high-value customers in accordance with the Gambling Commission’s HVC Guidance]

Self-exclusion

  • We agree with the Committee that those who have taken the important step to self-exclude from gambling should not be contacted by operators during their period of exclusion. [This would represent an extension of existing LCCP requirements. Whilst the reasoning is behind the comment may be sound, careful thought would need to be given to the wording of any amended rule in this respect]

A duty of care/Disputes between customers and operators

  • As outlined in the terms of reference for the Gambling Act Review, the government will now consider the evidence on the suitability of the current redress arrangements, and the benefits and disadvantages of any alternatives to the current approach. [This leaves open for debate the possibility (or perhaps that should be ‘probability’) of introduction of a Gambling Ombudsman in place of the existing ADR arrangements]

Loot boxes

  • The government will set out next steps on loot boxes early next year once the evidence gathered has been considered. The government will take action should the outcomes of the call for evidence on loot boxes support taking a new approach to ensure users, and particularly young people, are protected. [Whether such ‘action’ – which must now be practically inevitable – will be pursuant to the Gambling Act Review or under separate legislative means, remains to be seen]

Under-age gambling

  • The government …. believes that effective controls must be in place to ensure that the age limit is consistently enforced online …. We are inviting evidence on the effectiveness of existing controls as part of the Gambling Act Review.
  • There is scope for parents and guardians to do more to ensure that children are not engaging in gambling activities which the law does not permit. [Whilst most will surely agree with this sentiment, it is another matter how the Government could conceivably legislate on the point]

Minimum age for gambling

  • Owing to emerging evidence of harm, public opinion and the importance of protecting young people, we have decided to increase the minimum age to play National Lottery games to 18. The legislative change will come into force in October 2021.
  • The vast majority of online gambling regulated under the Gambling Act 2005 licensing framework is subject to a minimum age limit of 18 years. The age limit on society lotteries, which is another exception, will be considered as part of the Gambling Act Review. [Because the National Lottery age threshold is being increased from 16 to 18 for all of its products, it is difficult to understand why the Government might determine in due course that any different age restriction should apply to participation in society lotteries]

Children at racecourses

  • The government agrees that test purchasing at race meetings is important to protect children from gambling harm.

Advertising

  • Studies looking at the impact of advertising on adult gambling behaviours have indicated that exposure to advertising may be linked to a greater propensity to gamble. However, the existing evidence base does not demonstrate a causal link between exposure to gambling advertising that complies with the current rules and problem gambling. The government will keep this under review and has announced that it will consider evidence relating to gambling marketing and advertising as part of the Review of the Gambling Act 2005. [We have already noted above the Government’s specific reference to a “robust evidence base” being essential for effective policy making and regulation]

Sport and Advertising

  • Although betting operators no longer run TV adverts during matches, brand marketing in the form of gambling operator logos may be seen on player shirts and pitch-side hoardings or signage which appear on screen during televised matches. To date, the government has not seen evidence demonstrating a causative link between exposure to operator logos in this context and problem gambling in children or adults. Nor have we seen evidence that a familiarity with operator logos is linked to problem gambling. We are aware of studies which suggest a link between awareness of betting brands and intentions of young people to gamble in the future, but note Professor Forrest’s evidence to the Committee that limited weight should be placed on findings which centre on intention to gamble rather than actual gambling behaviour. [This will clearly be a key issue not only for gambling operators but also for the sports sector (including in relation to sports sponsorship) and, again, our above comment regarding the need for a “robust evidence base” is relevant]

Bet to view

  • The government believes sporting bodies have the right to benefit from commercial arrangements, including selling the rights to stream and televise coverage of matches and events. These arrangements can provide valuable income streams for sports but we are clear that all sporting bodies have a responsibility to ensure fans are protected from the risks of problem gambling.
  • The Gambling Commission and government have not seen clear evidence that allowing operators to show or stream sport poses a risk to the licensing objectives, including the protection of children and vulnerable people. We will continue to monitor the evidence on this issue, including on the effectiveness of the existing protections, and will be looking at the wider issue of promotional offers and other incentives offered to consumers as part of the Review of the Gambling Act. [The sentiments behind the above comments run counter to the Select Committee’s recommendation to prohibit licensees from offering bet to view inducements]

Direct marketing

  • We are concerned that a rule restricting all direct marketing and offers of free bets and other incentives or promotions to members of opt-in VIP schemes risks incentivising operators to expand these schemes as widely as possible, and incentivising customers to look to join these schemes. However, we will seek and consider evidence on promotional offers provided both through and separately to VIP schemes as part of the Gambling Act Review so that a range of options can be considered. [This comment is not supportive of the the Select Committee’s recommendations in this respect, but the proviso within the second sentence above underlines the need for all UK licensed operators to manage their high-value customers in accordance with the Gambling Commission’s HVC Guidance if they are to reduce the risk of greater restrictions being imposed on their ability to make promotional offers to their ordinary (i.e. non-HVC) customers]

Funding of research, education and treatment

  • The government has always been clear that should the voluntary system fail to deliver the level of funding necessary, it would look at the case for alternative funding mechanisms and all options would be considered, including a levy. As the Committee notes, in addition to the power to set licence fees payable to the Gambling Commission there is a power in the current legislation to place a levy on operators payable to the Gambling Commission to fund projects addressing gambling-related harm or its wider regulatory work. As part of the Gambling Act Review, we will gather evidence and look at funding flows to the Gambling Commission and how best the regulatory and societal costs of gambling can be recouped. [All possibilities remain open]
  • The government agrees that it is important to build the evidence base on gambling harms with high quality, independent research and is committed to working to this goal. We will be considering how to ensure the availability of high quality evidence to support policymaking as part of the Gambling Act Review. [With so many references by the Government to the need for a “high quality”  and/or “robust” evidence base to support policy making and regulation, the need for this requirement to be firmly borne in mind by all participants and decision-makers throughout the Gambling Act review process has been so heavily underlined that it must be focused upon by all who will be responding to the Government’s Call for Evidence before the 31 March 2021 deadline]
  • The government believes that a healthy research landscape is one in which the academic community is able to identify its own avenues and topics of research, rather than be limited to working to priorities set by a single body …. We agree with the Committee’s recommendation to seek the advice from the research councils on the way forward for gambling research, and are now working with these to look at ways of widening and encouraging the pool of researchers focused on gambling.
  • The government agrees that to support these objectives, all sectors of the gambling industry will need to regularly share data and make it available for research.
  • It is imperative that the introduction of any future clinics is carried out in a phased way and is fully evaluated to maximise impact and outcomes for service users.
  • The government has announced that the new NIHP will take on PHE’s health protection role. Alongside this work we will continue to focus on health improvement with support from expertise in PHE and we remain committed to tackling and building the evidence base on gambling-related harms. We are not anticipating there will be any changes to PHE’s current functions and responsibilities before Spring 2021.

Lotteries and taxation

  • Her Majesty’s Treasury (HMT) has, on a number of occasions, considered the case for taxing the National Lottery on a Gross Profits model, in line with commercial gambling, including most recently as part of the design phase for the 4th National Lottery Licence, which is due to start in August 2023. Having reviewed all the available evidence, HMT concluded that in order to protect income for good causes and tax revenue for the Exchequer, taxation on the National Lottery should remain at 12% on sales. [This sounds to us like a ‘closed book’]

Lotteries and advertising

  • The fourth National Lottery licence will see closer alignment between operator profit and returns to good causes through a new incentive mechanism. The operator will thus have a strong impetus to ensure efficiency in National Lottery advertising and administration costs. Accordingly, the licence will give them more flexibility to determine an appropriate level of marketing spend. In its regular monitoring of the operator’s performance in the fourth licence, the Gambling Commission will consider their administrative spending and advertising costs.
  • We have been clear that the recent increases to society lottery sales and prize limits that came into force on 29 July 2020 should not lead to an increase in their administration and marketing costs. We intend to review the impact of these changes in August 2021 (12 months after they came into force), and as part of that we will consider the impact on expenses and the proportion of proceeds spent on advertising, as well as the case for a £1 million prize limit, the link between sales and the maximum prize, and returns to good causes. The Gambling Commission is required to consider the reasonableness of society lottery expenses but does not have the power to impose a cap, as this was removed in the Gambling Act 2005. We will consider whether there is a case to reintroduce the cap as part of our review. [This comment is likely to cause greater concern to a small number of society lottery operators than others]