Fixed Odds Betting Terminals: Where did they come from and where did they go?

"There has been three fundamental failures of parliament in regulating this product; one of failing to act on evidence from the regulator originally, two of failing to adapt recommendations to an evolving marketplace and three a failure to ensure that there is independent oversight of the Gambling Market."

Fixed Odds Betting Terminals: Where did they come from and where did they go?

We’ve won. Fixed Odds Betting Terminals on our high streets are finally being regulated in the spirit of the law and we will hopefully see problem gambling in the UK start to decline. The machines have a certain kind of attraction I know all too well. I was a heavy user myself, I have a number friends who’ve experienced problems with them and I have even managed a branch of Coral. With flashing lights and spinning wheels, the thrill of a near miss, the big hit, the constant rushes of adrenaline and the occasional spectators you gather. There are four machines per shop, a number limit simply plucked out of the air in a backroom deal done to fudge the regulations. They pose a danger to those who are vulnerable and those who aren’t. The question we’ve got to ask is where was the pre-legislative scrutiny and why wasn’t the danger of this new technology flagged up earlier?

On my second day working for Tom Watson in August 2013 I got to meet him for the first time. He had just got back from a speaking tour in Australia where he had seen a campaign to properly regulate ‘Pinto’ machines – a form of FOBT with casino gaming at A$20 max per spin. They were everywhere, from social clubs to truck stops, and causing a large rise in problem gambling. I understood the terminology and knew of the campaign he was talking about, so we sat and went through my previous experience in the shops and how FOBTs were affecting Britain’s high streets. He sent me away to do the research and find other campaign groups that were active and making headway. One stood out head and shoulders above the rest – Matt Zarb-Cousins, Adrian Parkinson and Derek Webb from the Campaign for Fairer Gambling. They all played a critical role in pushing the £2 stake reduction over the line, with the help of Tom and others that were to come along later.

Through the course of my year there I got to witness the campaign go from strength to strength to the point where real change look achievable. Having the privilege to be part of Tom’s team and watch him work in partnership with others on a number of projects and campaigns, bringing in third parties and building momentum, was just wonderful.

During my time in the office I produced the below report into how FOBT’s came out from a legislative perspective and now that the campaign is won I feel it’s a good time to share it. New technologies and innovations are being created at an ever-increasing pace and parliamentarians, commentators and people who are interested have to take note of how important pre-legislative scrutiny is in a world where new tech will change our society, in ways we can’t even understand.

 

The rise of the High-street Casino: An analysis of how casino style games made it on to the high street

Introduction

Whether its meters for taxis, flying killing robots or Fixed Odds Betting Terminals (FOBTs) the pace of technological evolution is outrunning our ability to regulate it. The increasing speed of technological innovation challenges the way the government legislates to regulate. It is their duty to ensure that emerging technological advances are safe and introduced to the market with appropriate safe guards without stifling this innovation. FOBTs have shown that they aren’t keeping up with the changes in the marketplace and are often outwitted by those developing technologies to get round certain regulatory barriers. Within this report I will be analysing how FOBTs emerged into the gambling market and the process through which they were legitimised, observing the failings of the Gambling Bill Committee to categorise the product as a casino gaming platform.

The original legislation, allowing off course betting in 1963, specifies that the premise should be used to bet on events occurring not on site[1]. The technological get round was to have a digitally networked remote server off-site connected to all the estates machines; meaning in effect customers bet on an off-site event. Within the Act, subsequent Acts or amendments there was no classification that betting on such activity was legal or illegal, leaving FOBTs in regulatory limbo from the time they started to proliferate in 2001 until an agreement was made between the Industry and the Gaming Board in 2003.

One of the creators of the FOBT Steve Frator was quoted as saying “It developed through the concept of taking the regulations and pushing the boundaries to the limit.”[2] In fact he pushed the boundaries to their breaking point. The machine he invented and the new application for its technology pushed passed the regulatory framework put in place. The Betting Shop Industry proliferated this high speed, high stakes casino style gaming product when the way they were taxed was change from a stake or turnover based tax to one on gross profit, allowing the industry to have “new lower margin products”[3]. But the machines had no legal classification, they were seen at the time as “in breach of the spirit” of the regulations[4]. It wouldn’t be until the Bill Committee’s eyes were turned to super casinos that the industry managed to gain the legitimisation of FOBTs in the 2005 Gambling Act[5].

Through the evolution of a new technological platform the industry was able to subvert the pre-existing regulatory boundaries and through a loophole over 30,000 high speed, high stake casino tables arrived on the high street. The Bill Committee responsible for this did not understand the implications of what they were allowing seeing the machines as the same as electronic fruit machines much like what were allowed in pubs and clubs[6]. According to Tom Watson MP with super casinos failing but the machines receiving recognition in the regulations, a lobbyist came up to him afterwards and said of the Gambling Bill “we’re pretty happy we’ve got our machines”[7], Tom now admits he didn’t quite grasp the implications of this comment at the time.

With the 2005 Gambling Act coming into full effect the number of FOBTs on the high street rose and with it the increase in the targeting of those who are at the most risk of becoming problem gamblers. The number of betting shops did not have rise but the location of the shops where changing dramatically. Typically they were moved from leafy villages to join clusters on high street to the extent that on one street in Newham there are 14 betting shops on one street.

The following will review the process through which FOBTs “fell through the net”[8] and have now become a mainstay on the British high street. It will investigate how the Bookmaking industry subverted and then managed to override the regulatory framework and establish and legitimatised electronic casino tables in an environment not designed or licensed for them leading to the campaign to have them regulated in the appropriate manner.

Background

The Betting Shop industry started as the working man’s way to get a bet on the Horses without having to do it at the racecourse. They became legitimate venues after being legislated for under the Betting and Gaming Act 1960 which designated a Betting Shop as a venue to put “off-course” wagers on events happening outside of the venue itself. This is unlike a casino as they take wagers on events happening within the specified venue creating a clear distinction between Betting and Gaming.

The regulation around these Betting Shops have been shown to be slow to react across their history, live events were not allowed to be broadcast in the venues until 1986. The first electronic fruit machines were not introduced until 1996 and the 1960 Betting and Gaming Act was amended to allow these venues two machines per shop[9]. Up until the 2005 Gambling Act a betting shop could not advertise in its windows and had to have the windows blanked out.

Fixed Odds Betting Terminals proliferated in Betting Shops after the changes to the way in which Gambling was taxed in 2001 allowing for lower margin and higher turnover products[10]. At this time they were not classed as gaming machines they had no stake or prize limits. The technology was developed so that they could be used in a way would be considered an “off-course” style bet of an event happening elsewhere, subverting the Betting and Gaming Act 1960 in which casino style gaming was restricted to a different class of venue and taxed to a different level. They worked by digitally networking the machines across the estate together and using a random number generator for all of them so that technically the player would be betting on an event not gaming on a casino table.

When introduced the legal status of the machines was controversial. After they first appeared the Gambling regulator at the time, the Gaming Board, launched a High Court case when the industry refused to remove them[11]. After two months it became clear that a new Gambling Bill was being initiated so the case was settled out of court with the following restrictions: £100 stake limit with £15 max chip size, £500 jackpot limit and a limit of 4 per shop[12]. After this ‘behind closed doors’ agreement was reached and they were allowed to proliferate unheeded and unchallenged until their numbers reach over 30,000. The Bill Committee in the passing of the Bill did not amend or change these agreed levels and in the 2005 Gambling Act enshrined them in law[13]. This in effect meant that the regulatory framework within which the betting shops operated these machines was not decided by the Committee but in behind the scenes negotiations between the Gaming Board and the Industry without wider consultation.

The 2005 Gambling Act was based on Sir Alan Budd’s report Gambling Review Report produced for the Department of Culture Media and Sport[14]. The issue which has arisen from this is that the 2001 Gambling Review Report was not produced during the emergence of this new technology so offered no guidance on how it should be regulated. Although what the report did recommend was a pyramid style for the regulation of Gambling Products with the harder forms of gambling at the top, with greater regulation and player protection, and softer products lower down with less strict regulation[15].

He considered within this all Casino Style gaming to be at the top of the pyramid much like the electronic roulette offered by FOBTs. Another aim of Sir Alan Budd’s report was to stop the proliferation of smaller casinos in order to stifle the availability of these harder gambling products[16]. Tom Watson admits in this study that it appears in the 2005 Gambling Act not only did the Betting Shop Industry get “the best of both worlds” but that the government had “dropped the ball on such a hard gambling product” and allowed “what are effectively small casinos” to proliferate on the high streets[17].

Change in research focus

Having conducted my research into the Media effect on the legislative process in the case of Fixed Odds Betting Terminals on the high street, it became apparent that the machines themselves should not have been allowed in the first instance. After conducting an initial interview and speaking with both Members of Parliament and Campaigners it became clear that the regulatory process was not working as effectively as it should have been. This led me to research the introduction of these machines into Betting Shops on the high street and analyse how they subverted the regulatory framework on access to casino style gaming.

Having seen this in practise and analysed it further it became apparent that regulation was not keeping up with technological progression. From this and the pilot research I had already conducted it became clear that the most appropriate way forward for my research project was an analysis of how this happened and how the legislative process couldn’t keep up with technological get rounds that the market produced. In the words of Tom Watson: “It is apparent that the 2005 Gambling Act is already creaking at the seams”[18]

Literature Review

This research project is a qualitative study based on the emergence of a new form of technology that challenged the regulatory framework and speed of the legislative process. In order to gain an understanding of the FOBT and its emergence onto the market I conducted a review of Consultation Documents and Reports applicable to the technology. This helped in not only tracking the proliferation of the FOBT but also the challenges that were faced by the now defunct Gaming Board in getting to grips with the new gaming platform.

Within this literature review I also conducted a search for books on the subject of the emergence of FOBTs and how it had changed the landscape of the British Betting Shop industry. Unfortunately the literature available was limited. There were two books; ‘Addition By Design: Machines in Las Vegas’ which tracked the rise of machine betting in the round and ‘Down the Bookies: The first 50 years of Betting Shops’ which was more useful in giving the history of the emergence of the FOBT. The latter was written by John Samuels who has spent his whole career in the industry and so gave a unique perspective from the industry. He also spent time working for the Expert Witness Institute a consultancy firm specialising in Gambling and is a member of the Independent Betting Adjudication Service (IBAS) which frequently contributes to the debate around matters of betting and gaming.

Books

Schull, N (2012). ‘Addition By Design: Machines in Las Vegas’, Princeton University Press

Samuels, J (2011). ‘Down the Bookies: The first 50 years of Betting Shops’, Racing Post Books, Newbury

 

Research Papers

Mandel, G (August 8th 2009). ‘Regulating Emerging Technologies’, Temple University, Legal Research Paper Series

Winstanley, CA, Cocker, PJ and Rogers, RD, (2011). ‘Dopamine modulates reward expectancy during performance of a slot machine task in rats: evidence for a 'near-miss' effect’ Neuropsychopharmacology: official publication of the American College of Neuropsychopharmacology, Issue 36 (5) pg. 913-925.

 

Consultation Documents

DCMS Triennial Review 2013 into Stakes and Prizes:

Within the consultation process there were 66 unique responses to the Department of Culture Media and Sports Triennial Review. I have presented in Appendix 5 the 24 documents applicable responses to B2 category gaming machines within which each have substantive answers to questions 13 and 14 on the consultation document.

Reports

Sir Alan Budd 2001 ‘Gambling Regulation Review’

Department for Culture, Media and Sport Select Committee (July 12th 2012). “The Gambling Act 2005: A bet worth taking? First Report of Session 2012–13”, Volume 1 & 2

Department for Culture, Media and Sport (January 2013). “Government Response to the Select Committee Report: The Gambling Act 2005: A Bet Worth Taking?”

HM Customs and Excise (May 2003). “The Modernisation of Gambling Taxes: A REPORT ON THE EVALUATION OF THE GROSS PROFITS TAX ON BETTING”

William Hill (April 2004). “Annual Report and Accounts 2003”

Methodology

 

Through this piece of research and the changes that have occurred in its focus I have undertaken several different modes of research each with their own pitfalls. Being that this piece of research is primarily based on qualitative analysis of the regulatory framework surrounding FOBTs it is appropriate that analysis on what was reviewed and how it is applicable broken down in the following sections:

 

Media Analysis

Within my research proposal I had tasked myself with undertaking an analysis of the media’s influence on the regulation of Fixed Odds Betting Terminals. In order to do this I collated all the media stories from the stated period, October 2013 to April 2014, into a spread sheet[19]. I ranked each story as either positive negative or neutral and then weighting the stories by average readership. This was with the aim of creating a timeline of media attention to set against the events in Parliament. The criteria for each ranking were as follows; positive meant the piece was supportive of the Betting Shop industry’s stance on keeping the machines and that there was no issue with them; neutral meant the piece was supportive of the Betting Shop industry and ambivalent or calling on the need for more research before action on the machines; negative meant the piece criticised either the industry or the machines.

After starting this portion of the research and amalgamating all the media coverage it firstly became clear that all but a very small proportion of stories, mainly in local media, were negative to the campaign to get FOBTs restricted and none could be classed as neutral. Once this reality became clear I undertook the weighting of articles in accordance with average circulation but this again became a tricky undertaking given the scale of local media coverage balanced against national coverage and then balanced again against viewership on televised media

During the analysis of the media coverage of FOBTs a breakdown was created of each of the issues which have arisen over the time in which the machines have been on the high street. Although the research focus has changed to how the FOBT has challenged the regulatory framework, this breakdown is useful in reflecting the moves to have the regulations strengthened.

 

Interviews

Having changed the research’s focus it has become a qualitative piece of research which is based in part on the interviews I have conducted and on the analysis of legislation, reports and Hansard records of debates on the issue

During the early stages of this project I had arranged to have interviews with campaigners from the Campaign for Fairer Gambling in which I would ask about the media’s reaction to the Stop the FOBTs campaign they were running. The joint interview with Matt Zarb-Cousin and Adrian Parkinson uncovered what I believed to be a more applicable and focused research focus that would look in more detail at the emergence of FOBTs[20].

The campaigns consultant Adrian Parkinson had worked for the Tote as an area manager and then was promoted to the position of the estates machines manager. This gave him a unique perspective on the emergence of the FOBT and the regulatory framework surrounding both their introduction and legitimisation. From this interview I gained a perspective on why the machines should not have been allowed in the first instance and came to the decision to change the framework of this research to how the use of technology subverted the regulatory process. Having since changed the research focus Adrian had kindly answered a set of questions presented in a research format in which I asked about the emergence and rise of the FOBT in more detail and in a more applicable fashion to the focus of this research[21].

In order to gain a well-rounded perspective on the emergence of the FOBT and the way in which it overcame these regulatory hurdles I conducted an interview with Tom Watson MP who was a member of the Gambling Bill Committee focused on the 2005 Gambling Act which legitimised the machines and gave them a B2 class in which to operate[22]. He was able to give unique picture of how the FOBT “slipped through the net” and rose to become an issue on which he has campaigned for change[23].

 

Desk Research: Reports, Consultation Documents, Legislation and Hansard

In this report a qualitative analysis of how FOBTs became a legitimate betting product widely available on the High Street will be conducted. This report shall review the reports and the legislation produced surrounding the gambling sector and Hansard. In order to gain an understanding and track the rise and legality of Fixed Odds Betting Terminals it was necessary to look at how they were reviewed in Parliament.

The first document that it was appropriate to review was Sir Alan Budd’s Gambling Review report published in 2001 which looked into how gambling in the United Kingdom was regulated and how those regulations could be improved[24]. This report was critical in identifying the basis of the 2005 Gambling Act as it set out the principles by which the 3 aims of the Act were based, those being; Keeping Crime Out of Gambling, Fairness to the Punter and Protecting the Vulnerable[25]. The Secretary of State for Culture, Media and Sport in 2003 stated in an announcement to the House of Commons that “we accepted the vast majority of the Gambling Review's recommendations”[26]

What the report also tried to address was the balance needed in the regulation of hard gambling products on a sliding scale to soft ones. Within the report what was created was a pyramid style regulatory framework with wholesale changes proposed in advertising, gaming and planning laws. Many of these changes were to be taken up by the Gambling Bill Committee which meant that this review was critical in analysing the way in which the 2005 Gambling Act was produced. It also shows where the Bill Committee fell down by not properly addressing Budd’s concern about the growth and proliferation of hard gambling in small venues without proper controls.

The 2001 Budget in which the tax paid by the bookmaking industry was modernised allowed the machines gained a foothold in Betting Shops. With this I also sort out the consultation documents of the time from the Betting and Gaming Industry as referred to in the Chancellors Budget speech[27]. This document was useful in identifying how the industry used this change in the taxation system within the betting industry to their advantage. Having further reviewed the Association of British Bookmakers submission to the Triennial Review in 2013 on Stake and Prizes they state that the changes “allowed the betting industry to introduce new lower margin products. The roulette game was introduced to the 16,000 terminals which became known as Fixed Odds Betting Terminals (FOBTs)”[28]

Leading on from the taxation changes what was also required in order to gained a rounded understanding of the loophole exploited was the review of Betting and Gaming Legislation up to that point. I under took to review all of the following acts and amendments as they progressed through Parliament:

 

  • Gambling (Licensing and Advertising) Act 2014 - 2014 c. 17
  • The Categories of Gaming Machine Regulations 2007 - 2007 No. 2158 Regulation 5 Para 5
  • Gambling Act 2005 - 2005 c. 19 Part 1 GamingSection 6 / 2005 c. 19 Part 1 BettingSection 9 / 2005 c. 19 Part 3 Provision of facilities for gamblingSection 33 / 2005 c. 19 Part 10 DefinitionsSection 236 /
  • The Deregulation (Gaming Machines and Betting Office Facilities) Order 1996 - 1996 No. 1359 Article 7
  • Gaming Act 1968 - 1968 c. 65
  • Betting, Gaming and Lotteries Act 1963 - 1963 c. 2 (SCHEDULE 4 - Section 10A)

 

After a review and analysis was conducted of these Acts it became clear that the development of these machines was specifically aimed at manipulating the regulatory framework as it stood. This allowed the Betting Shop industry to supply a hard gambling product, roulette, in an environment which the 2001 Budd report deemed unsuitable.

Consultation with the House of Commons Research Staff

In order to ensure that the conclusions drawn and the sequence and nature of events was wholly accurate I felt it necessary to, at several points, consult with the House of Commons Research Department. I have attached this correspondence in Appendix 3 to make the process of validation of the research I have conducted sound. The nature of the assistance gained from the library expert, John Woodhouse, was purely that of validation and clarification of research that had already been conducted by myself and the use of which was cleared with Tom Watson MP prior to contact.

Analysis

The following will be a qualitative analysis of the process through which FOBTs emerged onto the gambling market and the process in which they were recognised in the 2005 Gambling Act. It will observe how the regulations changed and the Gambling Bill Committee failed to recognise the changes that had occurred in the market place since the 2001 Gambling Review Report was published. There will also be an analysis of the problems encounter since the 2005 Gambling Act was passed and how the regulatory system has failed to adapt to these issues.

 

2001 changes to taxation

In Gordon Brown’s 2001 budget changes were made in the way betting shops paid tax on their products from a turnover or stake based tax to a Gross Profit Tax (GPT)[29]. The Association of British Bookmakers (ABB) said that at the time the change “allowed the betting industry to introduce new lower margin products. The roulette game was introduced to 16,000 terminals which became known as Fixed Odds Betting Terminals (FOBTs)….”[30] Before this change the machines did have a small presence on the High Street but only in very small numbers as the Betting Shop would have a high exposure to an inflated Tax spend.

“A customer could walk into a betting shop with £20 and, because of a constant win/loss throughout the afternoon, place bets (over the counter) with a total value of £100 but still only the £20 to lose. With FOBT machines where the payback was high at 97.25%, this £20 could be ‘churned’[31] so that maybe £500 of stakes could be placed. Hence at the end of the day, with the customer losing his £20 but his stake registered on the machine as £500, at the rate of 6.75% betting tax a sum of £33.75 would need to be paid to the government. This would result in a net loss to the betting shop of £13.75 (£33.75 tax to pay - £20 lost by the punter). So betting shops were reluctant to install the machines. Following the changes brought about on 1st January 2002, FOBTs were an instant success with punters and bookmakers. The betting shop owner did not care how much churn there was, as tax was now on profit (loss by the punter) and not on stake”[32]

From the explanation above it is clear what the change in Tax calculation made and how it opened the door for allowing such a low margin, high turnover product to be widely rolled out. This was not specified or recognised in the tax changes that were brought into force and did not change the regulations applicable to Betting Shops or the products they offered with the ABB admitted “betting terminals were not subject to any specific legislation.”[33]

The machines themselves were in the words of their inventor “created to push the regulatory boundary to its limits”[34] and without the Gaming Board regulating or the Department of Culture, Media and Sport legislating this created a grey area in which the Betting Shop industry profited. The machines were introduced to shops having had no customer safety tests done and no research carried out on the impact of such a hard gambling product being placed in an easily accessible and public location. The Chair of the Gaming Board for Great Britain in 2002 stated this concern and went further to say "Their proliferation is a breach of the spirit and intent of current legislation. There are special dangers associated with machines because of their potentially addictive characteristics."[35]

Although the nature of the technology used allowed the Betting Shop industry to use the regulations to their advantage. The type of betting allowed in a Licensed Betting Office (LBO) at the time were wagers placed on off location events, typically dog and horse racing and football. The way in which these machines manipulate this distinction was by holding the event on a remote server linked to all the machines on a company’s estate. This subversion was made clear in the Draft Gambling Bill, stating that “The ABB argue that the machines provided a betting activity which should therefore be permitted in licensed betting offices.”[36] But this assertion was challenged by the Gaming Board stating that they are “for all practical purposes identical to gaming machines and should be treated as such”[37]

This stand point at the time was taken under advisement by HM Exercise and Custom in their review of the tax changes that were put in place. Stating in their evaluative report into the change to GPT in May 2003 “that FOBTs … are gaming machines and therefore illegal”[38] The action that was taken to tackle the illegality of these machines in late 2002, early 2003 was the Gaming Board initiating a High Court case against the industry to tackle the introduction of these machines[39]. This was commented on by Andrew Burnett, an analyst from Merrill Lynch, stating that “The introduction of casino-style games such as coin-operated roulette may be seen as a covert attempt by bookmakers to introduce casino-style gaming into a bookmaking environment” and that the High court was likely to rule in favour of the Gaming Board[40].

Although the case was settled out of court in November 2003 with a voluntary arrangement between the Association of British Bookmakers, Machine Manufacturers, the Department of Culture Media and Sport and the Gaming Board in anticipation of the initiation of a new Gambling Bill. This agreement capped the stake from unlimited to £15 per chip and £100 per play, capped the maximum pay-out from over £30,000 to £500, restricted the casino-style games to only roulette and restricted the number of machines in each Licensed Betting Office to 4[41]. This was to also co-inside with the introduction of an Association of British Bookmakers endorsed Player Protection Code of Conduct for all staff and premises.

The Betting Shop industry responded to this “landmark case” by initiating in 2003 an “aggressive roll out of FOBTs”[42] across their estates. The apparent legitimisation and loose voluntary regulatory framework introduced under this agreement allowed the Betting Shop industry to expand the operational presence of the FOBT, shifting the business model from over the counter betting on events such as racing to one based on gaming. This shift as previously stated was in contravention to the spirit and intent of the regulations at the time.

In the 2001 Sir Alan Budd report into the gambling market in the United Kingdom, a pyramid style approach to the way in which gambling products are regulated was suggested[43]. This involved harder forms of gambling being heavily regulated and as the products became softer and of less risk of creating problem gambling, the regulation should be lessened. The shake-up of the licensing laws surrounding gambling establishments placed heavy restrictions on casinos as their primary activity was gaming but limited restriction on the Betting Shop industry as their primary activity was betting.

This distinction and separation was placed in order to reduce the risk of the proliferation of small casinos which offered casino style hard forms of gambling[44]. Although these recommendations were not made in the light of the proliferation of FOBTs which gave Betting Shops access to casino style gaming products. This disparity was not addressed when the 2005 Gambling Act went through the Houses of Parliament. Instead the Betting Shop industry got “the best of both worlds”[45], the legitimisation of a hard gambling product and the liberalisation of planning laws, taking away the demand test for local authorities to reject a Betting Shops planning application[46].

This conclusion was also reflected in the Casino Operators Association UK submission to the 2013 DCMS triennial review into stakes and prizes which stated:

“Sir Alan’s premise of thus "reducing the risk of a proliferation of small casinos" has been completely negated by the fact that 8,800 Licensed Betting Offices have been allowed to offer four hard-core casino gaming machines in each of their shops in the form of Category B2 gaming machines (formerly known as Fixed Odds Betting Terminals – FOBTs). These machines have changed the face of ‘bookies’ and now represent more than 50% of an LBO’s income – a worrying statistic not least because, under the "Primary Activity" guidelines laid down by the Gambling Commission, betting should be the primary activity of a betting licensed premises, not gaming machines! If the machines remain, casino-level control is required of LBOs who operate Category B2 machines.”[47]

Although correct that under the Primary Activity guidelines a Licenced Betting Office’s Primary focus should be betting the industry classifies the machines as not gaming, but betting machines[48].

The guidelines of the 2003 voluntary agreement between the ABB, Gaming Board, DCMS and the machines manufactures was enshrined in the 2005 Gambling Act. These guidelines at the time were criticised by others in the market place such as Phil Jarrold of BACTA who told the Select Committee in oral evidence that, “the deal that has been put together to put a brake on proliferation and public policy interest on the matter, in our opinion, will do exactly the opposite”[49]

In the period between the tax changes in 2001 and the 2005 Gambling Act passing the amount of FOBTs had expanded through the Betting Shop estates and grown in number to around 33,000. This poses the question as to whether the Gaming Board was right to have continued the legal case against the Industry or whether it was right to settle and leave the question for Parliament to answer. In order to judge this question it was put to both Tom Watson and Adrian Parkinson to which two opposing responses were received. The first from Tom, who sat on the Gambling Bill Committee, was to agree with the actions of the Gaming Board saying that with “something so new like that it should really be taken at ministerial level and I guess what they were doing was bridging the gap”[50]. Were as the former Industry employed campaigner said that “the settlement that was reached was a complete fudge” and that “the Gaming Board were taken for fools by the betting industry … but also Government”[51].

Given that the Gaming Board hadn’t conducted any studies or had any consultation on the issue maybe it was right to be left with the Bill Committee to take on the question of legality or legitimacy. But then given the light touch settlement reached the Industry was able to move its business model to be based heavily on this new technology. This meant that after settling the case in 2003 by 2005 heavily restricting the machines or banning them would cost the industry and therefore jobs making it harder to do.

This heavy restriction though did not occur and instead the negotiated settlement levels agreed behind closed doors with no consultation or ministerial input was enshrined in the passing of the 2005 Gambling Act. These levels were decided by a body described as “not fit for purpose” and not “formed to deal with this technology or this form of gambling”[52]. With the Bill Committees attention focused on the big issue at the time, super casinos, FOBTs rode the “slip stream into law”[53].

Although in the passing of the 2005 Gambling Act what the Bill Committee did do, recognising in some way the lack of understanding of the FOBT, was to give the Secretary of State the power to use the precautionary principle and if they so choose could reduce the stake on the machines from £100 to £2. This comes with its own problems which Tom set out in his interview saying that “perhaps we were a little unfair on future conservative ministers in allowing them to carry such a heavy load on their own and … with hindsight maybe we should have given the decision to a regulator alone.”[54]

 

Rise and rise again, the creation of the mini casino

After the 2005 Gambling Act was passed and the Betting Shop industry had license to continue with the aggressive expansion of the FOBTs on their estates. But what became apparent was the transfer of shops from rural or semi-rural locations to town and city centres. This has led to the clustering of Betting Shops in poorer areas[55]. In turn leading to the accusation that the industry has changed its focus away from more affluent areas and is routinely targeting more vulnerable less-affluent areas. This was recently reviewed in a study conducted by the Liverpool Public Health Observatory which stated both that “betting shops are more likely to be areas of high deprivation”[56] and that “at-risk gambling and problem-gambling were associated with area deprivation”[57]. This is in conjunction with further research used in the study which concluded that “FOBT users gamble on average £17 per spin, although those in lower socio-economic groups gamble around £19 per spin.”[58] Although this study only presents a correlation between the concentration of Betting Shops and the inflated interest in lower socio-economic areas Tom Watson stated that the results in the study are “compelling”[59].

Even the Industry now recognises that this is a problem with Ralph Topping, CEO of William Hill, saying “I’m against betting shop clustering on social grounds” as they can cause harm[60]. This all stems from the 2001 Gambling Review in which Sir Alan Budd recommends taking away restriction from Betting Shop planning applications and tightening up those on Casinos[61]. It was aimed at discouraging the spread of small casinos and the proliferation of hard gambling products to the High Street. Although as the report was produced before FOBTs became a wide spread product in Betting Shops the recommendations made were outdated and the disparity was not addressed when the Gambling Bill Committee brought forward the planning changes. This shows again how the regulatory framework has not kept pace with the challenges which this new form of technology has created, allowing for what are “effectively small casinos”[62] to proliferate on Britain’s High Streets.

 

But why did this not come to light sooner?

During the period after the passing of the 2005 Gambling Act, research into problem gambling was funded, distributed and prioritised through three separate bodies. The Gambling Research Education and Treatment (GREaT) were responsible for fundraising, the Responsible Gambling Fund (RGF) for distributing and the Responsible Gambling Strategy Board (RGSB) advises on a national responsible gambling strategy and sets priorities for research, education and treatment.

Their combined remit was to promote research and education in problem gambling in order to help the industry tackle the issue. Although the RGF produced statements calling for more research and restrictions on FOBTs as they increased the chance of a recreational gambler becoming a problem gambler[63].  This came during a review by the Gambling Commission into the tripartite structure of the commissioning bodies. These instances came to a head in 2011 when the RGF withdrew from its funding agreements with GREaT stating that the:

“trustees found that the tri-partite arrangement set up after the review of research, education and treatment of problem gambling in 2008 to be unworkable and that they were unable to operate with the degree of independence consistent with their governance documents and their duties under charity law”[64]

The ABB in a statement about the RGF said that the organisation was not fit for purpose and would be merged with the GREaT to create the Responsible Gambling Trust[65]. The new body would have on its commissioning board 5 independent persons and 5 persons representing industry in order to give the organisation balance. This is not the only example of how the industry have control of the funding levers go against the effectiveness and independence of such bodies. The RGT distributes funding to other charities who directly treat those with gambling problems. One such body is the Gordon Moody Association who provide residential treatment to those most adversely affected by problem gambling.

In early 2012 Simon Perfitt, a self-confessed FOBT addict, was given 18 months of residential treatment at one of the Associations centres. He was incredibly grateful for this and gave a statement for their annual accounts and reading material in which he explained what he was addicted to and how that addiction had taken over his life. But when reviewing what Gordon Moody had produced he questioned why any reference to FOBTs had been taken out to which he said to Randeep Ramesh from the Guardian "Anyone in receipt of funding does not want to make too much fuss about FOBTs because they are scared of losing their funding"[66]

NatCen Social Research conducted a scoping study into the research that was commissioned by the RGT in which it stated that the industry held and commissioned research was “data rich and information light”[67]. It went on to criticise the commissioned research as having no or very little link to player behaviour and that without observational studies would not produce the information needed[68]. But the research was not stopped or altered in fact Helen Grant MP, the Minister responsible, came out in support of it saying that:

“The Responsible Gambling Trust is carrying out research to better understand how people behave when playing on gaming machines and what helps people to play responsibly. It is the largest piece of academic research that has ever been undertaken on the issue. It aims to understand patterns of gaming behaviour and to identify when there is robust evidence that consumers may be experiencing problems.”[69]

This statement was in direct contradiction to the scoping study undertaken by Nat Cen. It was only after this error was the industry pushed, thanks in part to the Campaign for Fairer Gambling constant pressure[70], to give a terminal to a research body for player interaction data to be gathered[71].

The Gambling Bill Committee failed to regulate an emerging product that was little understood at the time and the research conducted since into these machines has not been forthcoming even though since 2001 a problem has been noted. With the levy on the Industry only voluntary and the research commissioned influenced by the interests of the Industry its independence can be called into question. This study asked Tom Watson what he thought of the situation and whether the Bill Committee made a mistake in not making the levy mandatory to which he commented saying that:

“the current arrangements do not seem particularly transparent and I don’t think they are very healthy and that was definitely a mistake in the legislation. We should have obliged the industry to cough up really I think and had a much more independent fell to [commissioning of research and regulation] of activities.”[72]

 

Additional research required

If given a more extended time frame for the research focus I have changed to there are changes and more in-depth study of the applicable literature. Within the realm of gambling worldwide there have been many instances of the emergence of highly addictive easily accessible gaming machines. We have seen these examples most recently in Ireland[73] where the machines themselves were banned from shops last year before being given the chance to become an established part of the bookmaker’s business model.

If I could do this research again it would be a comparative study of how other Legislatures had dealt with the issue, primarily focusing on the two closest examples Australia and Ireland. Within Australia the situation was similar to that which we have in this country in that the machines themselves had become established before they were curbed by government[74].

In order to also have a better understanding of the research that had already been done and also to gain the perspective of experts in the area interviews would be conducted with staff from the Gambling Commission, Responsible Gambling Trust and also the Psychology Department at the University of Cambridge. This would be to go alongside the comparative study so to better assess the regulatory and legislative process in the United Kingdom Gambling Market.

 

Conclusion

This report analyses the failure of Parliament to react to an emerging technology that went “against the spirit of the Act” in which the Industry justified its presence[75]. It shows how even when the regulator at the time brought up and acted on concerns about the illegitimate nature of the product and concerns that a product was unsafe Parliament failed to react and legislate to tackle it. The report shows how the Gambling Bill Committee failed to adapt to the changing landscape of the industry and legislate appropriately to address the Regulators’ concerns. They also failed to adapt the recommendations brought forward from Sir Alan Budd’s Gambling Review Report to this changing landscape to address one of the key aims of the report; to stop the proliferation of hard gambling products on Britain’s High Streets. Instead fulfilling one of the recommendations made, the liberalisation of planning laws. This meant that not only did Betting Shops now have license to offer a hard gambling product, which had originally subverted the regulatory frame work surrounding Betting Shops, but also now had the ability to cluster stores in targeted areas, overriding any concerns that local communities may have about their proliferation.

Further to this what is also documented above is the failure of the 2005 Gambling Act to ensure the three key aims of the Act are met, those being; firstly protecting children and other vulnerable persons from being harmed or exploited by gambling, secondly ensuring that gambling is conducted in a fair and open way and thirdly preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime. This occurred through allowing the Industry to have a strong influence over the bodies that were designated to oversee the industry, distribute funding, commission research and help problem gamblers. Though the industry, the regulator and the Department of Culture, Media and Sport has been aware that there could be an issue with FOBTs it has taken up to now for any appropriate research to be conducted into their effects on player behaviour.

To sum up there has been three fundamental failures of parliament in regulating this product; one of failing to act on evidence from the regulator originally, two of failing to adapt recommendations to an evolving marketplace and three a failure to ensure that there is independent oversight of the Gambling Market. In order to address these failings going forward it can be seen that what could have prevented this issue from the outset is a strong, reactive regulator that is supported by the Department and that has an independent oversight body that can commission research and set recommendations unhindered by industry influence.

 

Adam Allnutt is a Young Fabian and Local Government Liaison officer on the executive. Follow him on Twitter at @AdamAllnutt

 

 

 

 

 

 

 

 

Bibliography

 

Appendixes

  1. Media Coverage of Fixed Odds Betting Terminals
  2. Motions (1. Lib Dems) (2. Oppo day deb) (3. EDM 580)
  3. Correspondence with the House of Commons Library
  4. Interviews (1. Tom Watson) (2. Adrian Parkinson and Matt Zarb-Cousin)(3. Adrian Parkinson follow up)
  5. Consultation Documents from the Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits

 

Books

Schull, N (2012). ‘Addition By Design: Machines in Las Vegas’, Princeton University Press

Samuels, J (2011). ‘Down the Bookies: The first 50 years of Betting Shops’, Racing Post Books, Newbury

 

Articles

Anonymous (October 8th 2013). ‘Grant to take over responsibility for levy decision’, The Racing Post

Anonymous (July 29th 2011). ‘UK's Responsible Gambling Fund terminates funding agreement with GREaT Foundation’, Totally Gaming

Anonymous (July 17th 2013). ‘Luck of the Irish as government moves to overhaul gambling, casino laws in Ireland’, Irish Central

Cohen, T (April 6th 2014). ‘£1BILLION in one month... what Ladbrokes made from 'crack cocaine' machines: Secret document reveals huge profits as Downing Street announces crackdown on terminals’, The Daily Mail

Cohen, T (January 29th 2014). ‘We need curb on betting shops, says William Hill: Bookmaker's chief executive says clusters of outlets can cause harm’, The Daily Mail

Cummings, L (December 30th 2002). ‘Bookies new betting games in court’, BBC News

Randeep, R et al (April 6th 2014). ‘FOBTs: ‘The Crack Cocaine of Gambling’ – Video’, The Guardian

Randeep, R (January 29th 2014). ‘Bookmakers must hand over gambling machine for testing, say ministers’, The Guardian

Randeep, R (December 13th 2013). ‘Rise of the machines puts punters at bigger risk, says gambling addict’, The Guardian

Randeep, R (November 8th 2013). ‘The gambling machines helping drug dealers 'turn dirty money clean', The Guardian

Randeep, R (April 6th 2014). ‘David Cameron set to announce crackdown on gambling machines’, The Guardian

Randeep, R (April 30th 2014). ‘Maximum cash stake on fixed-odds betting terminals to be restricted’, The Guardian

Randeep, R (Febuary 14th 2014). ‘Bookmakers submit to testing of high-stakes gambling machines’, The Guardian

Sergeant, H (January 3rd 2014). ‘Gambling's crack cocaine: They're the disturbing new face of gambling - betting machines that enslave the poor and earn bookies BILLIONS’, The Daily Mail

Stone, D (December 6th 2012). ‘FOBTs Overtake OTC Betting While UK On-Course Horserace Betting Nosedives’, Gambling Compliance

Milman, O (Wednesday 11th April 2013). ‘Pokies and the Australian addiction to gambling’, The Guardian

Nelson, N (February 2nd 2014). ‘Bookies asked to hand over 'crack cocaine of gambling' machines to test addictive properties’, The Mirror

Wood, G (April 20th 2014). ‘Bookmakers retaliate in battle over tax on FOBT high street casinos’, The Guardian

 

Briefing Papers

Campaign for Fairer Gambling (December 2013). ‘Stop the FOBTs campaign briefing’

Department for Culture, Media and Sport (April 2014). ‘Gambling Protections and Controls’

Department for Culture, Media and Sport (October 2013). ‘Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits’

Local Government Association (January 8th 2014). ‘LGA briefing for Opposition Day debate: Betting Shops (Fixed Odds Betting Terminals)’

Woodhouse, J (June 14th 2014). ‘Fixed odds betting terminals’, House of Commons Library, ref: 2014/6/99-HAS

Woodhouse, J (October 18th 2013). ‘Gaming machines – research on social impact’, House of Commons Library, ref: 2013/10/60-HAS

 

Press Releases

Alan Shatter TD, Republic of Ireland Minister for Justice, Equality and Defence (July 2013). ‘Minister Shatter publishes General Scheme of the Gambling Control Bill 2013’, Department of Justice and Equality

Association of British Bookmakers (September 2013). ‘Putting 40,000 jobs at risk does not help problem gambling’

Campaign for Fairer Gambling (March 1st 2014). ‘Campaign questions research commissioned by Responsible Gambling Trust’

Newham Council (November 4th 2013). ‘Tough new conditions imposed on William Hill betting shop by Newham council’

 

Hansard

HC Deb (2000-01) 364 col. 304 – 2001 Budget

HC Deb (2013-14) 573 col. 294, 375, 379 – Opp Day FOBTs debate

HC Deb 15 July 2003 vol 409 cc27-9WS

 

Speeches

Speech to BACTA convention by Peter Dean, Chairman of the Gaming Board for Great Britain, London 26th November 2003

 

Reports

Budd, A et al (July 2001). ‘Gambling Review Report’, Department of Culture Media and Sport

Department for Culture, Media and Sport Select Committee (July 24th 2002). “The Governments Proposals for Gambling: Nothing to lose? Seventh Report of Session 2001-2002, Volume 1” ref: HC 827 - 1

Department for Culture, Media and Sport Select Committee (July 12th 2012). “The Gambling Act 2005: A bet worth taking? First Report of Session 2012–13 Volume 1 & 2”

Department for Culture, Media and Sport (January 2013). “Government Response to the Select Committee Report: The Gambling Act 2005: A Bet Worth Taking?”

Geofutures & NatCen (November 2011). ‘Machines Research 1: Mapping the social and economic characteristics of high density gambling machine locations, Prepared by Geofutures and NatCen for The Responsible Gambling Fund / The Responsible Gambling Strategy Board’

Gordon Moody Association (April 2013). “Annual Report and Accounts 2012/13”

HM Customs and Excise (May 2003). “The Modernisation of Gambling Taxes: A REPORT ON THE EVALUATION OF THE GROSS PROFITS TAX ON BETTING”

Houses of the Oireachtas (November 2013) ‘Joint Committee on Justice, Defence and Equality Report on hearings in relation to the Scheme of the Gambling Control Bill’

Husain, F et al (December 9th 2013). “Examining machine player behaviour: a qualitative exploration, Part 2”, Nat Cen

Lewis, C, Holmes, L & Scott-Samuel (April 2014). ‘Fixed Odds Betting Terminal use and problem gambling across the Liverpool City region- Observatory Report No. 95’, Liverpool Public Health Observatory

Wardle, H et al (December 9th 2013). ‘Scoping the use of industry data on category B gaming machines, Part 1’, Nat Cen

William Hill (April 2004). “Annual Report and Accounts 2003”

 

Draft Bills

House of Lords & House of Commons Joint Committee on the Draft Gambling Bill - Draft Gambling Bill, Session 2003–04, Volume I

 

White papers

Department for Culture, Media and Sport (March 2002). ‘A Safe Bet for success’ HC 161

 

 

Consultation Documents

Department for Culture, Media and Sport (January 2013). ‘Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits: Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines’ (listed in appendix

 

Acts of Parliament

Gambling (Licensing and Advertising) Act 2014 - 2014 c. 17

Gaming Act 1968 - 1968 c. 65

The Deregulation (Gaming Machines and Betting Office Facilities) Order 1996 - 1996 No. 1359 Article 7

Betting, Gaming and Lotteries Act 1963 - 1963 c. 2 (SCHEDULE 4 - Section 10A)

The Categories of Gaming Machine Regulations 2007 - 2007 No. 2158 Regulation 5 Para 5

Gambling Act 2005 - 2005 c. 19 Part 1 GamingSection 6 / 2005 c. 19 Part 1 BettingSection 9 / 2005 c. 19 Part 3 Provision of facilities for gamblingSection 33 / 2005 c. 19 Part 10 DefinitionsSection 236 /

 

2.1 Liberal Democrat Conference: Fixed Odds Betting Terminal Motion

17.20 Policy motion

Chair: Qassim Afzal

Aide: Baroness Brinton (Vice Chair, Federal Conference Committee)

F37 High Street Gambling

Ealing Borough

Mover: Rt Hon Don Foster MP

Summation: Cllr Jon Ball

Conference notes:

  1. a) The increase in the number of betting shops in deprived areas since the last Labour Government passed the Gambling Act 2005 which included the removal of the need for operators to prove unmet demand.
  2. b) That betting shops are currently in the same use class as banks and building societies, allowing them to be opened with no planning consent required for change of use in some cases.
  3. c) That the majority of the revenue generated from betting shops is now from high reward gambling machines rather than from traditional betting on sporting events.
  4. d) The Portas Review into the future of High Streets describes gaming outlets as a “blight on the high street”, and that their proliferation is creating unsightly gambling ‘clusters’ on struggling retail hotspots.
  5. e) That Newham Council’s recent refusal to allow a further betting shop application in a street with an existing proliferation, which was seen as a test case, was overturned on appeal.
  6. f) That in many areas, crime and anti-social disorder has been associated with a proliferation of betting shops. Conference welcomes the DCMS-initiated review of fixed odds betting terminals, including stakes, prizes and numbers of machines and recognises that the holding of the review is a success of Liberal Democrats in Government. Conference believes that local councillors should be empowered to decide whether or not to give approval to additional gambling venues in their community. Conference therefore calls on Liberal Democrats in government to push for:
  7. Betting shops to be put in a new separate planning use class, allowing local authority planning committees to control them
  8. The Gambling Act to be amended to allow council licensing committees to take into account the cumulative impact of a proliferation of gambling activities when considering applications.

Applicability: England.

Mover of motion: 7 minutes; all other speakers: 4 minutes. For eligibility and procedure for speaking in this debate, see page 8.

The deadline for amendments to this motion is 13.00, Monday 2nd September; those selected for debate will be printed in Conference Extra. See page 8 for further information. The deadline for requests for separate votes is

09.00, Monday 16th September; see page 6.

2.2 Opposition Day Debate: Motion 8th January 2014

 

That this House is concerned that the clustering of betting shops in or close to deprived communities is being driven by increasing revenue from fixed odds betting terminals (FOBT) rather than traditional over the counter betting; believes that this has encouraged betting shop operators to open more than one premises in close proximity to one another; is aware of the growing concern in many communities about the detrimental effect this is having on the diversity and character of UK high streets; is alarmed that people can stake as much as £100 every 20 seconds on these machines; is further concerned that the practice of single staffing in betting shops leaves staff vulnerable and deters them from intervening if customers suffer heavy losses thereby undermining efforts by the betting industry to protect vulnerable customers; further believes that local authorities should be able to establish a separate planning class for betting shops and that they should be given additional licensing powers to determine the number of FOBT machines within existing and proposed shops and to require that the machines are modified to slow the rate of play and to interrupt when people play for long periods; and calls on the Government to put local people before the interests of the betting shop operators and give local authorities the powers they need to respond to concerns from their local communities and stop the proliferation of FOBT machines and betting shops.

Ayes 232, Noes 314.

 

The government's amendment, defending its position

That this House understands the public concerns around fixed odds betting terminals regulated by the Gambling Act 2005; notes that the Government has made clear that it considers the future of B2 regulation to be unresolved; welcomes the Government-backed research into the effect of fixed odds betting terminals on problem gambling; believes that any development in the Government’s policy on this matter should be evidence-led; calls upon the betting industry to provide the data required for a proper understanding of the impact of fixed odds betting terminals; and further notes that local authorities already have planning powers to tackle localised problems and target specific areas where the cumulative impact of betting shops or other specific types of premises might be problematic, as well as licensing powers to tackle individual premises causing problems.

Ayes 311, Noes 225.

 

2.3 Early Day Motion 580: FIXED ODDS BETTING TERMINALS

 

That this House notes with disappointment that the Government has missed an opportunity to proceed with a reduction in stakes or prizes on fixed odds betting terminals in response to its consultation on proposals for changes to maximum stake and prize limits for category B, C and D gaming machines; expresses its concern that, unlike fruit machines in pubs, bingo halls and amusement arcades, where stakes are limited to £2, gamblers can bet up to £100 every 20 seconds on fixed odds betting terminals; further notes that such terminals have been pejoratively described as the crack-cocaine of gambling addiction and that they proliferate in the poorest areas, taking money away from those who can least afford it; believes that the Government's package of reforms will support the bookmakers whilst further encouraging problem gambling; and calls on the Government to reduce the maximum stakes on fixed odds betting terminals from £100 to £2 in line with all other category B machines.

 

Appendix 3.1: Fixed Odds Betting Terminal Library Note Ref: 2014/6/99-HAS

 

To:

Adam Allnutt for Tom Watson MP

From:

John Woodhouse

Ref:

2014/6/99-HAS

 

Home Affairs Section

x5036

woodhousej@parliament.uk

Date:

12 June 2014

 

 

 

 

 

 

 

 

Fixed odds betting terminals

 

Fixed odds betting terminals (FOBTs) began appearing in betting offices after changes to the taxation of gambling were introduced in October 2001 (i.e. when the taxation of gambling was moved away from a duty on stakes to a tax on bookmakers’ gross profits).

 

The legal status of FOBTs was initially controversial. Under the legislation in place at the time of their introduction, FOBTs were not classed as gaming machines and so there were no limits on where they could be placed and in what numbers.[76] In a Written Ministerial Statement of 8 January 2003, the then Government noted its “concern” at the “increasing installation” of FOBTs in licensed betting offices and that this “risk[ed] seriously increasing problem gambling”. The Statement went on to say that the then Gaming Board for Great Britain and the Association of British Bookmakers (ABB) had agreed to bring a test cast to clarify the status of FOBTs under the existing law.[77] The Statement also said that the Government planned to draft new legislation so that “those betting machines which in reality involve gaming will be brought within the relevant controls for gaming machines”.

 

The legal action between the Gaming Board and ABB was settled out of court on 19 November 2003. The Gaming Board had argued that FOBTs were “for all practical purposes identical to gaming machines and should be treated as such”.[78] The ABB argued that FOBTs provided a betting activity which should therefore be permitted in licensed betting offices.[79] The agreement reached in November 2003 meant that:

 

  • Licensed betting offices could operate no more than 4 machines in total (whether conventional gaming machines or FOBTs, or a mix of the two);

 

  • The maximum prize on FOBTs would be £500 and the maximum stake £100;

 

  • No casino games other than roulette would be allowed on FOBTs; and

 

 

  • The speed of play on FOBTs would be restricted[80]

 

Association of British Bookmakers research

 

At the then Government’s request, the Association of British Bookmakers (ABB) commissioned research to assess the effectiveness of the November 2003 agreement in providing protection against problem gambling and to measure and explain levels of problem gambling amongst FOBT users. The subsequent report by Europe Economics was published in April 2005.[81] A summary of the report estimated that there were 20,000 terminals in approximately 8,000 betting shops.[82] On the November 2003 agreement, the report found that:

 

1.8.4 There are indications that the marginal effects of the Code of Practice have been beneficial. There is no widespread opposition to the main customer-focused provisions of the Code among FOBT users. It seems to us likely that the vast majority of FOBT users were playing within the provisions of the Code before it was devised.

1.8.5 Among the generality of FOBT users there is more support for than opposition to five out of the six key provisions of the Code. There is strong support for the limitation on numbers of machines in a betting shop, for the minimum time interval between bets, and for GamCare help pages and signage. Regular FOBT users also support these measures, though among them there is net opposition to the limitations on stake and payout and to confining casino-type games to roulette.[83]

The report said it had found no evidence that FOBTs were closely associated with problem gambling:

 

1.8.2 Problem gamblers characteristically participate in a variety of forms of gambling, and it has not been statistically possible through this research to identify any one form of gambling as causing or aggravating problem gambling. There is no evidence in this study which suggests that FOBTs are closely associated with problem gambling.

1.8.3 If problem gambling is to be studied comprehensively, this research suggests it would be better not to begin by focusing on specific forms of gambling. It may be preferable to obtain a sample of problem gamblers and to investigate their gambling practices and preferences.[84]

The Gambling Act 2005

 

In her March 2004 evidence to the Joint Committee on the Draft Gambling Bill 2003/04, the then Secretary of State for Culture, Media and Sport, Tessa Jowell, said that a “final decision” on treating FOBTs as gaming machines and classifying then as B2 machines would be taken following the first research study commissioned, at the Government’s request, by the Association of British Bookmakers (referred to above).[85]

 

Following the findings of the ABB report, the Gambling Act 2005 went ahead and classified FOBTs as B2 gaming machines.  An operating licence (issued by the Gambling Commission), together with a betting premises licence (issued by the licensing authority), allows for up to four B2 machines to be sited on betting premises.

 

The Minister at the time, Richard Caborn, later told the Culture, Media and Sport Committee that if FOBTs had not been controlled “you would have had wall-to-wall FOBTs”.[86]

 

Further discussion of the limit of four machines per betting shop – and how this was reached - can be found in oral evidence that Richard Caborn gave to the Culture, Media and Sport Committee during its inquiry on the 2005 Act.[87] The report (including evidence) is available here: http://www.publications.parliament.uk/pa/cm201213/cmselect/cmcumeds/421/421.pdf

 

-  the evidence is available from Ev 97 onwards (12 January 2012).

 

Appendix 3.2: Clarification of no legal status for Fixed Odds Betting Terminals prior to the 2005 Gambling Act

 

From: ALLNUTT, Adam
Sent: 12 June 2014 18:48
To: WOODHOUSE, John
Subject: RE: Library response: fixed odds betting terminals

 

Hi John,

 

Can you please confirm that there the changes made in 2001 did not license FOBTs?

 

Kind regards

 

Adam Allnutt

 

 

 

 

Library response: fixed odds betting terminals

 

 

Adam,

 

If you are referring to the change in taxation mentioned in my earlier response, this was introduced through the 2001 Budget [HC Deb 7 March 2001 c304] and came into effect from 6 October 2001 [HM Treasury press notice 81/01, Betting tax to be scrapped early, 13 July 2001]. The Association Of British Bookmakers (ABB) said that the change “allowed the betting industry to introduce new lower margin products. The roulette game was introduced to 16,000 terminals which became known as Fixed Odds Betting Terminals (FOBTs)….” (ABB, The truth about betting shops and gaming machines – ABB submission to the DCMS triennial review, April 2013, p8).

 

 

 

John Woodhouse

Home Affairs Section

1 Derby Gate, London, SW1A 2DG

T: 020 7219 5036 | E: woodhousej@parliament.uk

 

intranet.parliament.uk | www.parliament.uk | @commonslibrary

 

You can give us your feedback on Library services via the Library online feedback form.

 

 

 

 

 

 

 

Hi John,

 

Thank you, to clarify there was no legal status or regulation regarding FOBTs on the statute book?

 

Kind regards

 

Adam Allnutt

 

Office of Tom Watson MP

Portcullis House,

House of Commons

Westminister,

SW1A 0AA

02072198123

 

 

Adam,

 

In evidence to the Culture, Media and Sport Committee, Richard Caborn (former DCMS Minister) said:

 

“Had we not controlled it [the growth of FOBTs] with a voluntary agreement between the industry and Government three years before the Act came on the statute book, you would have had wall-to-wall FOBTs in this country…The responsibility of the industry and the initiatives that were taken at that time controlled that…”[Ev 97-98, my emphasis]. The following pages to this quote give further background from Mr Caborn on what was done at the time.

 

As I mentioned, this is the link to the Joint Committee on the Draft Gambling Bill 2003–04.

 

I hope this helps.

 

 

 

John Woodhouse

Home Affairs Section

1 Derby Gate, London, SW1A 2DG

T: 020 7219 5036 | E: woodhousej@parliament.uk

 

intranet.parliament.uk | www.parliament.uk | @commonslibrary

 

You can give us your feedback on Library services via the Library online feedback form.

 

 

 

Appendix 5: Consultation Documents from the Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits

The following are the extracted submissions with applicable response to questions 13 and 14 on the consultation document regarding category B2 gaming machines:

 

  • The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits April 2013
  • Response to the Consultation on the Triennial Review of Stakes and Prizes, March 2013 – Simon Thomas (Hippodrome Casino Ltd)
  • TRIENNIAL CONSULTATION RESPONSE ON BEHALF OF SG GAMING – 8th April 2013.
  • Inspired Gaming Group’s response to the DCMS consultation Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines
  • Response to “Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines” - Institute of Economic Affairs
  • The Truth about Betting Shops and Gaming Machines – Association of British Bookmakers submission to DCMS Triennial Review April 2013
  • Response by Betfred to the Government’s Triennial Review of Gaming Machine Stake and Prize Limits 15th January 2013
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - British Horseracing Authority’s Response (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines – Casino Operators Association UK (January 15th 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Gala Coral Group (April 9th 2013)
  • Response to Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Haringey Council (5th April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Response to the Consultation by Emeritus Professor Jim Orford, School of Psychology, University of Birmingham, Birmingham, UK/Founder Gambling Watch UK (April 2013)
  • Submission to the Triennial Review of Gaming Machines Stake and Prize Limits - Knowsley Metropolitan Borough Council’s Response (April 2013)
  • PUBLIC CONSULTATION ON PROPOSALS FOR CHANGES TO MAXIMUM STAKE AND PRIZE LIMITS FOR CATEGORY B, C AND D GAMING MACHINES, 15 JANUARY 2013 – Responsibility in Gambling Trust
  • CONSULTATION RESPONSE: TRIENNIAL REVIEW OF GAMING MACHINE STAKE AND PRIZE LIMITS – Ladbrokes PLC (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits for Category B, C and D Gaming Machines (The Triennial Consultation) – BACTA (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Response from Hackney Borough Council (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Response from Medway Council (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - Response from Opera House Casino (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits – Response from Paddy Power (April 2013)
  • Submission to the Triennial Review of Gaming Machine Stakes and Prizes – The Salvation Army (April 2013)
  • Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize – Consultation on Proposals for Changes to Stake and Prize Limits for Category B, C and D Gaming Machines – Response to Consultation by the Gambling Reform and Society Perception Group (GRASP) (April 2013)
  • DCMS Gambling Act 2005 Triennial Review of Gaming Machine Stake and Prize Limits – Westminster Borough Council (April 2013)
  • WILLIAM HILL’S RESPONSE TO THE DCMS CONSULTATION GAMBLING ACT 2005: Triennial Review of Gaming Machine Stake and Prize Limits - Proposals for Changes to Maximum Stake and Prize Limits for Category B, C and D Gaming Machines. (April 2013)

 

[1] Betting, Gaming and Lotteries Act 1963 - 1963 c. 2 (SCHEDULE 4 - Section 10A)

[2] Nelson, N (January 6th 2014). “Inventors of the 'crack cocaine of gambling' sold their creation for £100MILLION”, The Daily Mirror

[3] The Association of British Bookmakers (April 2013). ‘The Truth about Betting Shops and Gaming Machines – ABB submission to DCMS Triennial Review April 2013’ pg. 8-9

[4] Appendix 5: The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits April 2013 pg. 5-6

[5] Appendix 4.1: Tom Watson Interview

[6] Ibid

[7] Ibid

[8] Ibid

[9] The Deregulation (Gaming Machines and Betting Office Facilities) Order 1996 - 1996 No. 1359 Article 7

[10] The Association of British Bookmakers (April 2013). ‘The Truth about Betting Shops and Gaming Machines – ABB submission to DCMS Triennial Review April 2013’ pg. 8

[11] Cummings, L (December 30th 2002). ‘Bookies new betting games in court’, BBC News

[12] Ibid

[13] Gambling Act 2005 - 2005 c. 19 Part 1 GamingSection 6

[14] Budd, A et al (July 2001). ‘Gambling Review Report’, Department of Culture Media and Sport

[15] Ibid pg. 58

[16] Ibid pg. 112

[17]Appendix 4.1: Tom Watson Interview

[18]Appendix 4.1: Tom Watson Interview

[19] Appendix 1

[20] Appendix 4.2

[21] Appendix 4.3

[22] Gambling Act 2005 - c. 19 Part 10 Definitions Section 236

[23] Appendix 4.1

[24] Budd, A et al (July 2001). ‘Gambling Review Report’, Department of Culture Media and Sport

[25] Ibid pg. 4

[26] HC Deb 15 July 2003 vol 409 cc27-9WS

[27] HC Deb March 7th 2001 vol. 364 col. 304

[28] The Association of British Bookmakers (April 2013). ‘The Truth about Betting Shops and Gaming Machines – ABB submission to DCMS Triennial Review April 2013’ pg. 8

[29] HC Deb (2000-01) 364 col. 304

[30] The Association of British Bookmakers (April 2013). ‘The Truth about Betting Shops and Gaming Machines – ABB submission to DCMS Triennial Review April 2013’ pg. 8-9

[31] ‘Churn’ is an industry term meaning turnover

[32] Samuels, J (2011). ‘Down the Bookies: The first 50 years of Betting Shops’, Racing Post Books, Newbury pg. 179

[33]Ibid pg. 8-9

[34]Nelson, N (January 6th 2014). “Inventors of the 'crack cocaine of gambling' sold their creation for £100MILLION”, The Daily Mirror

[35] Appendix 5: The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - April 2013 pg. 4

[36] House of Lords & House of Commons Joint Committee on the Draft Gambling Bill - Draft Gambling Bill, Session 2003–04, Volume I pg. 128 para 486

[37] Speech to BACTA convention by Peter Dean, Chairman of the Gaming Board for Great Britain, London 26th

November 2003

[38] HM Customs and Excise (May 2003). “The Modernisation of Gambling Taxes: A REPORT ON THE EVALUATION OF THE GROSS PROFITS TAX ON BETTING” pg. 15 para. 3.45

[39] Cummings, L (December 30th 2002). ‘Bookies new betting games in court’, BBC News

[40] Ibid

[41] Appendix 5: The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits April 2013 pg. 5-6

[42] William Hill (April 2004). “Annual Report and Accounts 2003” pg. 3-4

[43] Budd, A et al (July 2001). ‘Gambling Review Report’, Department of Culture Media and Sport pg. 126

[44] Ibid pg. 116

[45] Appendix 4.1

[46] Local Government Association (January 8th 2014). ‘LGA briefing for Opposition Day debate: Betting Shops (Fixed Odds Betting Terminals)’

[47] Evidence submitted by the Casino Operators Association (GA 19) to the Department of Culture Media and Sport, Session 2010-2012 (July 29th 2011) para 4.2

[48] House of Lords & House of Commons Joint Committee on the Draft Gambling Bill - Draft Gambling Bill, Session 2003–04, Volume I pg. 128 para 486

[49] Ibid pg. 128 para 488

[50] Appendix 4.1: Tom Watson Interview

[51] Appendix 4.1: Adrian Interview

[52] Appendix 4.1: Tom Watson Interview

[53] Ibid

[54] Ibid

[55] Geofutures & NatCen (November 2011). ‘Machines Research 1: Mapping the social and economic characteristics of high density gambling machine locations, Prepared by Geofutures and NatCen for The Responsible Gambling Fund / The Responsible Gambling Strategy Board’

[56] Lewis, C, Holmes, L & Scott-Samuel (April 2014). ‘Fixed Odds Betting Terminal use and problem gambling across the Liverpool City region- Observatory Report No. 95’, Liverpool Public Health Observatory pg. 13

[57] Ibid pg. 15

[58] Ibid pg. 12

[59] Appendix 4.1

[60] Cohen, T (January 29th 2014). ‘We need curb on betting shops, says William Hill: Bookmaker's chief executive says clusters of outlets can cause harm’, The Daily Mail

[61] Budd, A et al (July 2001). ‘Gambling Review Report’, Department of Culture Media and Sport pg. 126

[62] Appendix 4.1

[63] Geofutures & NatCen (November 2011). ‘Machines Research 1: Mapping the social and economic characteristics of high density gambling machine locations, Prepared by Geofutures and NatCen for The Responsible Gambling Fund / The Responsible Gambling Strategy Board’ pg. 60-61

[64] Anonymous (July 29th 2011). ‘UK's Responsible Gambling Fund terminates funding agreement with GREaT Foundation’, Totally Gaming

[65] Ibid

[66] Randeep, R (December 13th 2013). ‘Rise of the machines puts punters at bigger risk, says gambling addict’, The Guardian

[67] Wardle.H, Seabury.C, Ahmed.H and Coshall.C (December 9th 2013). ‘Scoping the use of industry data on category B gaming machines’, Nat Cen pg. 58

[68] Ibid pg. 14

[69] HC Deb (2013-2014) Vol. 573 Col. 379

[70] Randeep, R (Febuary 14th 2014). ‘Bookmakers submit to testing of high-stakes gambling machines’, The Guardian

[71] Nelson, N (February 2nd 2014). ‘Bookies asked to hand over 'crack cocaine of gambling' machines to test addictive properties’, The Mirror

[72] Appendix 4.1

[73] Anonymous (July 17th 2013). ‘Luck of the Irish as government moves to overhaul gambling, casino laws in Ireland’, Irish Central

[74] Milman, O (Wednesday 11th April 2013). ‘Pokies and the Australian addiction to gambling’, The Guardian

[75] Appendix 5: The Campaign for Fairer Gambling: Consultation response to the DCMS Gambling Act 2005: Triennial Review of Gaming Machine Stake and Prize Limits - April 2013 pg. 4

[76]             Culture, Media and Sport Committee, The Gambling Act 2005: a bet worth taking?, HC421 2012-13, July 2012, p18; A summary of gaming machine regulation under the Gaming Act 1968 is given in chapter 6 of the Gambling Review Report (July 2001, Cm 5206).

[77]             HC Deb 8 January 2003 c7WS

[78]             Quoted in Joint Committee on the Draft Gambling Bill, HC 139-I 2003/04, April 2004, p128

[79]             Ibid, p128

[80]             Ibid, p128

[81]             Europe Economics, Fixed odds betting terminals and the code of practice: a report for the Association of British Bookmakers Limited, April 2005

[82]             Europe Economics, Fixed odds betting terminals and the code of practice: a report for the Association of British Bookmakers Limited – summary only, April 2005, para 1.2.5

[83]             Ibid

[84]             Ibid

[85]             Joint Committee on the Draft Gambling Bill, Draft Gambling Bill, 7 April 2004, HC 139-II 2003-4, Ev 562

[86]             Culture, Media and Sport Committee, The Gambling Act 2005: a bet worth taking?, Ev 98

[87]             Culture, Media and Sport Committee, The Gambling Act 2005: a bet worth taking?, July 2012

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