Regulus Partners analyses the events of what could become a defining week for UK gambling, as an under-pressure Gambling Commission commits to a review of stakes and prizes, whilst the conservative government appoints its eighth DCMS leader.
When the story of the prohibition of gambling in Great Britain comes to be written, this week’s events in Parliament may well be characterised as a tipping point.
On Wednesday, the chief executive of the Gambling Commission, Neil McArthur presented himself at the Grimond committee room in the Portcullis House annex of Parliament. He was there to answer questions and to bring the regulator’s perspective to an inquiry into online gambling by the Gambling Related Harm All-Party Parliamentary Group (APPG). He walked out having seemingly committed to an official review of stake and prize limits for online gambling and to provide an opinion to the Government on what should be done about advertising. On a number of levels, the impact could be profound.
It seems unlikely that McArthur had sought prior authority for these decisions (which also seemed to contradict his testimony to a House of Lords select committee less than 24 hours previously) – but ‘on the hoof’ seems to be the way that gambling policy is formulated these days. In terms of stakes and prizes, the CEO of the Gambling Commission agreed to hold a review within six months (a very short period of time for an issue both complex in terms of data and narrow in terms of impact); on what authority and through which framework (especially given the promise of a wider review) remains unclear. No formal announcement affirming or clarifying the oral statement has been made.[Editor’s note: The Gambling Commission has since been in touch to say: “We said last October that we would be looking at online stake limits as part of our ongoing work to reduce the risks of gambling related harm. This work is in addition to us focusing on VIP practices, advertising technology and game design. We will publish our assessment and next steps for online stakes and further protections later this year.”]
For those watching, it was hard not to feel a degree of sympathy for McArthur who faced a withering barrage of questions (with some of the committee members displaying the incivility that has sadly become a hallmark of British politics in recent years). That, however, goes with the territory of being the boss of the gambling regulator and the questions and style of interrogation will have been known in advance. Moreover, the DCMS had carefully crafted a shield to deflect awkward questions – that a review of the Gambling Act was on its way and that questions of legislative change would need to be deferred until then. Holding this line might have made for an uncomfortable hour or so in Westminster but sometimes the job requires the holder to perch upon a cactus.
The issue here is not so much about online stakes and prizes – as we have written before, a complete absence of any limits in all circumstances is likely to be unsustainable and this is an issue that has been brewing for some time. What is significant is the process for re-regulation that is now being established. We have entered the realms of knee-jerk policy-making where significant changes are made in pursuit of appeasement rather than coherence (something for which certain industry participants are just as culpable as their regulator).
It is easy to understand why both regulator and the regulated may fear a comprehensive review of gambling; but surely a considered, structured and suitably constitutional process must be preferable to the current system where a relatively small parliamentary club appears to wield such significant soft legislative power.
For the sake of clarity, this is not a critique of Carolyn Harris’s APPG which (while we may disagree with some of the methods and some of the analysis) has done a remarkably effective job of bringing important issues to light. We would be just as concerned if the pro-industry Betting and Gaming APPG, chaired by Philip Davies was able to wield such obvious influence on legislation.
The Government has known for some time that it needs to get a grip on gambling policy. From a policy perspective, Labour has led the running since before the ‘Triennial’ debate started (when online constituents still thought they were safe and were happy to throw FOBTs under the bus), while each month seems to spawn new controversies (some real, some manufactured). Notwithstanding this week’s ministerial changes at the DCMS, Wednesday’s events in Portcullis House seem likely to bring forward and potentially narrow the scope of the official Government review of the Gambling Act, giving operators less time to prepare and potentially more restricted room for manoeuvre. However, what precisely happens next remains unclear.
Our financial analysis of adopting £2 for online slots suggests a net c. £650m (30%) direct impact on the slots market, mitigated by c. 30% substitution to other products (assuming restrictions to slots only). This would, therefore, hit some operators very hard but would be a net benefit to others; the overall impact would be to reduce the online sector by c. £480m in revenue terms or c. 8% (assuming growth into the impact period). This may sound manageable (if operationally painful), but on purely financial analysis is almost as dangerously simplistic a view as the policy itself, in our view, because the economic and behavioural impact is likely to be much more profound.
Restricting only slots stakes actively encourages substitution to other products where restrictions do not apply (far more so online than landbased) and where similar restrictions would make far less sense (as well as being far more damaging: singles bets and table games simply would not work as a customer proposition). This would mean that a combination of product development and customer adoption would likely reduce the initial impact significantly and eventually almost entirely though perfectly legal circumvention. The policy would then have to be copied into where it doesn’t work (non-slots products), repealed in favour of more effective measures or, most likely, given an award for effective public health intervention without any evaluation whatsoever.
With a gambling review looming in a rare backdrop of party political stability we have the opportunity to reset our gambling laws based upon evidence and beneficial outcomes. This opportunity was given a serious knock this week. Hopefully, following the promise of another MacArthur, effective governance will return…
UK: Another new DCMS Sheriff hits town
This week’s long-awaited Cabinet reshuffle by Prime Minister Boris Johnson resulted in yet another changing of the ministerial guard for gambling. The departure of Nicky Morgan as Culture Secretary had been expected following her decision not to stand again as an MP last December and her subsequent elevation to the House of Lords. The decision to move Helen Whately (Cons, Faversham and Mid-Kent) from Arts, Heritage and Tourism (and gambling) to the Department of Health was logical – both of her parents were doctors and she has long been tipped as a future Health Secretary – but was nevertheless disappointing given her short (5 months) and much-interrupted stint at the DCMS.
The new Culture Secretary, Oliver Dowden (Cons, Hertsmere) appears to have had little political interest or involvement in gambling since becoming an MP in 2015 – but unlike most people who have held the post over the last decade, he may struggle to keep things that way. Government plans for a review of primary legislation will require Dowden to engage far more closely with the subject matter than many of his predecessors.
Meanwhile, it is not entirely clear who will pick up direct responsibility for gambling. The highly regarded Nigel Huddleston (Cons, Mid Worcestershire) seems most likely to take on the brief which would also quell (for now at least) rumours that gambling policy is set to come under the auspices of Health.
The revolving door of responsibility at the DCMS is one of the major reasons why gambling policy is now in such a mess. Between 2001 and 2007 Tessa Jowell (as Culture Secretary) and Richard Caborn (as Sports Minister) held the reins as they guided policy from the Budd Report to the Gambling Act. Yesterday, Oliver Dowden became the twelfth person to hold the post of Culture Secretary in just 12-and-a-half years; while Nigel Huddleston will be the tenth gambling minister in that time (assuming that is incorporated within his brief). Only three of these 22 ministers have managed to retain the position for two years or more (Gerry Sutcliffe, Tracey Crouch and Jeremy Hunt) and there has not been a single instance of internal succession from gambling minister to Culture Secretary. It is little wonder that the ‘Safe Bet for Success’ envisioned by Dame Tessa Jowell back in 2002 has fallen into such decay.
Helen Whately enjoyed (if that is the word) one last session of oral questions on Thursday before escaping to the Department of Health. Andrew Jones (Cons, Harrogate and Knaresborough) triggered a debate on ‘problem gambling’ in which he was enthusiastically joined by Carolyn Harris (Lab, Swansea East), calling for a ban on gambling advertising in sport; Tracey Crouch (Cons, Chatham & Aylesford), expressing concern about “loot boxes, skins and e-gaming”; and Ronnie Cowan (SNP, Inverclyde) likening the UK gambling market to the “wild west” (it seems likely that Mr Cowan is not a fan of westerns).
Hop-along-Cowan also came out guns blazing in the online harms debate when he repeated his claim that children were being “groomed” for gambling via video gaming; and asked what protective measures would be brought in on loot boxes and skins.
Calamity Carolyn Harris is nothing if not persistent. No sooner had she obtained an impromptu commitment from the Gambling Commission to review online stake and prize limits than she fired off a written question to the DCMS to ask when the review would commence. Ranil Jayawardena (Cons, North East Hampshire) is also proving to be a rather dogged interrogator of gambling policy. He doubled-down on his question to HM Treasury regarding “the adequacy of monies raised by gambling duties to meet the costs to the public purse associated with gambling”. It is a perfectly reasonable question but the intent is open to interpretation. Is Mr Jayawardena seeking to secure greater funds from Exchequer for addressing gambling harms or is he rather suggesting that gambling duties may need to go up (this in a week when the Gambling Commission hinted that it would like to see licence fees increased)?
Elsewhere, Alex Sobel (Leeds North West) made a couple of probes on efforts to protect children from loot boxes and online gambling. Mr Sobel is now in self-isolation due to concerns the coronavirus and we wish him well. Andrew Selous (Cons, Bedfordshire) gave a shout-out to the Bishop of St Albans for his work on gambling harms as part of the Church of England’s broader approach to “strengthening family life”. Meanwhile – and as if to demonstrate that it is still possible to support the gambling industry – Sir Roger Gale (Cons, Thanet North) asked HM Treasury why slots arcades are excluded from high street rate relief. It’s a good question and – for now at least – the answer is unlikely to feature references to drug dealers, cowboys or “the Satanic spawn of Beelzebub”…which is nice.
Parliament is now in recess and will sit again on Monday 24 February. We must hope for good things when it returns…but it is perhaps wise to be prepared for the bad and the ugly.