Executive Summary – The Central Dilemma: Regulating gambling and the arguments against it

THIS IS THE EXECUTIVE SUMMARY OF AN ESSAY WHICH WILL BE PUBLISHED EVENTUALLY!

  • Sir Alan Budd, Chair of the Gambling Review Body, whose report provided the blue print for the Gambling Act 2005, coined the term; ‘The Central Dilemma’, which he describes as “the familiar dilemma between the desire to permit free choice and the fear that such choice may lead to harm either to the individual or to society more widely”
  • The dilemma is that, as with alcohol and arguably some recreational drugs, it is entirely possible to enjoy gambling as a leisure activity and suffer no harm or cause any. Excessive gambling (like excessive alcohol and drug use) can cause harm to both the user and their friends and family, plus, if a large percentage of population indulges to excess, this can then be detrimental to society as well.
  • The central dilemma for those who decide to what extent gambling is restricted, is to how much any restriction will protect those vulnerable to its excesses but at the same time not hinder those, who will neither suffer nor cause suffering. This debate goes throughout history and as such changes as the social values and morals of society have themselves changed through time
  • Budd believed that gambling needed regulating for a number of interrelated reasons:
    • gambling can cause serious financial and psychological harm to some of those who do it (and their families)
    • gambling is intrinsically undesirable because of the attitudes it sustains or encourages
    • the activity of gambling can adversely affect the lives of those who do not gamble.

The Royal Commission on Lotteries and Betting 1932-33

  • To give evidence to the premise that the central dilemma has been debated throughout the modern history of gambling legislation and regulation, we can first turn to the comments made by the Royal Commission on Lotteries and Betting 1932-33, the first of three Royal Commissions on gambling in the 20th Century
  • “In our view the State should not interfere with private gambling between individuals, but is concerned with the facilities for organised gambling. There is a sharp distinction between action which involves interference with individual liberty, and action directed against organised exploitation of the gambling propensity, often for private gain…Stated broadly, we think that the general aim of the State in dealing with facilities for organised or professional gambling should be to prohibit or place restrictions upon such facilities, and such facilities only, as can be shown to have serious social consequences if not checked.”
  • The Chair of the Commission, Sir Sidney Rowlatt’s view can be considered as basically pragmatic but more importantly, rejects the ethical arguments for banning gambling and focussing more on preventing harm where possible.

The Royal Commission on Betting, Lotteries and Gaming 1949-51

  • The Chair of the Commission, Sir Henry Willink wanted to outlaw commercial gambling operators while preserving the right of individuals to gamble amongst themselves. The difference with Rowlatt is that Willink could see the benefits of having some commercial gambling as long as it was properly controlled and regulated. Willink was heavily influenced by the success of the liquor licensing laws.
  • Willink saw there being three principles to successful gambling legislation; the first that there should be strict control and regulation of the provision of commercial gambling, the second, that the law should apply fairly to all sections of the community and the third; “that as much information as is practicable should be made available to the public about the extent of gambling, and wherever possible, the conduct of various forms of gambling.”
  • As with the Select Committee inquiry into gambling in 2011-12, the Willink Commission also stated “We have had the difficulty, with all the resources at our disposal, in finding answers to many factual questions of the greatest importance to our enquiry, and we think it is essential, if any further progress is to be made in dealing with this problem, to remove as many of these difficulties as possible”
  • “Our concern with the ethical significance of gambling is confined to the effect which it may have on the character of the gambler as a member of society. If we were convinced that, whatever the degree of gambling, this effect must be harmful, we should be inclined to think that it was the duty of the State to restrict gambling to the greatest extent practicable. This point of view was put to us by some witnesses, but we do not think that it can be established either by the abstract argument or by an appeal to experience. It would be out of place to discuss here the abstract arguments, but from our general observation and from the evidence which we have heard we can find no support for the belief that harm either to the character of those who take part in it, or to their family circle and the community generally. It is in immoderate gambling that the dangers lie; an individual or a community in whose life gambling plays too prominent a part betrays a false sense of values which cannot but impair the full development of the personality or the society. It is the concern of the State that gambling, like other indulgences such as drinking of alcoholic liquor, should be kept within reasonable bounds, but this does not imply that there is anything inherently wrong in it.”
  • The Willink Commission would lead directly to the Betting & Gaming Act 1960 that would legalise betting shops. Unfortunately the debate would be so focussed on betting shops that other aspects of the Bill would not get scrutinised properly. This meant that the actual Act would be poorly worded and allow for commercial gaming, something it didn’t intend to do. This meant that until the passing of the Gaming Act in 1968, which brought in the Gaming Board for Great Britain, commercial gambling was unregulated and so became infiltrated by criminal elements. By 1968 there would be an estimated 1200 gaming venues and public outcry at organised crime. The draconian powers given to the Gaming Board would clean up the industry and reduce the number of gaming establishments dramatically. James Callaghan MP, the Home Secretary who brought in the Gaming Bill, was no fan of deregulating gaming; ‘Gaming is not a socially desirable way of spending leisure. Therefore, I do not accept the view that it would be a good thing to keep the club [casino] addresses, the games they play, their prizes and hours, before the public view. This is why I recommend the House to accept the new Clause, which will undoubtedly put prohibitions on advertising.’ The new regulatory environment would be based on ‘unstimulated demand’ (no advertising), licensing of premises and gambling operators.

The Royal Commission on Gambling 1978

  • The last Royal Commission on gambling in the 20th Century, Lord Rothschild’s Commission on Gambling 1978, would consider the State’s paternalistic approach to gambling; “Some members of the Commission believe they have a duty positively to protect people from over indulging, for example; in interval games in bingo clubs when they cannot afford to do so. By the same token, some members of the Commission feel that local authorities should have the opportunity of preventing housewives from being deflected into prize bingo establishments during their morning shopping in the high street. Other Commissioners believe that this approach is not only over paternalistic but that it negates the benefits of self control. All of us, however, agree that the gambling public should be told the facts about the types of gambling in which they indulge and that some measure of paternalism is desirable in some cases.”
  • The Commission, described its philosophy as merging the ideas laid out in the Willink Report with that of sixties paternalism, they defined them in three principles:
    • “(i) To interfere as little as possible with individual liberty to take part in the various forms of gambling but to recommend the imposition or continuance of such restrictions as are desirable and practicable to discourage socially damaging excesses and to prevent the incursion of crime into gambling.
    • (ii) To support broadly the principle that the facilities offered should respond only to “unstimulated demand”
    • (iii) .. gamblers should be invariably be made aware of what they are letting themselves in for when they gamble – in other words what they may lose (Gamblers usually know or think they know what they may win).
  • One of the Royal Commission’s main recommendations was for a National Lottery which would be adopted in 1993. This in turn would so upset the ‘level playing field’ in the gambling industry that the government felt it was necessary to deregulate the industry from it 1960’s and 1970’s restrictions. Piecemeal attempts at liberalisation were found wanting and in 2000 the New Labour government announced it would set up a review of the gambling laws.

The Gambling Review Body 2001

  • The Budd Review would reject the idea of sixties paternalism as a way of regulating gambling and recommend opening the industry more up to market forces. Budd believed with the right consumer protection in place, the industry could be safely liberalised.
  • Budd recommended that the 24 hour waiting rule be abolished. This was the waiting time between a person making an application to become a member of a casino and them being able to gamble. It was brought in as an attempt to prevent ‘impulsive’ gambling. It was emblematic of the old paternalistic approach. Statutory membership of casinos and bingo halls was also recommended to be abolished. This would end the idea of gaming establishments as private clubs.
  • Budd also recommended the end of the prohibition on advertising, and thus abolishes the concept of ‘unstimulated demand’. 
  • Budd’s recommendations would turn into law in the Gambling Act 2005. It would appear that we have almost turned full circle, as it can be argued that Budd’s approach is one of pragmatism similar to that expressed by Rowlatt in the Royal Commission of 1932-33. Seeing the potential disruptive nature of internet gambling as well as recognising that the deregulation already introduced in response to the National Lottery meant that the restrictions implicit in paternalism could no longer have an equitable place in gambling legislation
  • By not wishing to interfere with an individual’s right to gamble, Budd maintains a constant theme throughout the modern history of gambling legislation of protecting an individual’s right to gamble (if done so ‘normally’ – i.e. not to excess).It should be stated that while the The Gambling Act 2005 removed much of the paternalistic approach to gambling it also brought in for the first time a comprehensive approach to problem gambling with all operators having to have prevention measures and training in place before they can be licensed. The Act maintains the liberal belief in individual liberty while at the same time enforces a safety net for those who have a problem. It could be argued that 21st Century paternalism is about freedom of the individual albeit with safeguards
  • Professor Peter Collins, Director of the University of Salford Centre for the Study of Gambling, in his book ‘Gambling and the Public Interest’ outlines, what he categorises, as the six arguments against gambling; the “enforcement of morals argument”, the “paternalist argument”, the “human costs argument”, the “social costs argument”, the “democratic consensus argument” and the “practical difficulties argument”

The “enforcement of morals argument”

  • This argument is the oldest and often called the moral argument as it concerns the view that gambling is immoral. Currently this is the view of only the fringe elements of the Christian church, due to their belief that gambling’s appeal to luck is contrary to a belief in god. Islam prohibits gambling but from the view that people should earn money from honest work (similar to their prohibition on usury) and that gambling can cause problems between people, so it is arguable that their prohibition is due to the effects of gambling rather than gambling itself. The main Christian religions and other mainstream faiths do not have an issue with gambling per se, just a concern with the effects of excessive gambling.
  • The main antagonists in the gambling debate are the fringe Christian groups who would appear to have more influence with government than the number of their followers would merit.
  • Professor Collins points out; “most people think that it is morally wrong for the state to interfere with the essentially private choices of individuals about how they will spend their time and money, providing they are not doing harm to anyone else [also known as Mill’s liberty principle after John Stuart Mill]. In particular, it seems wrong for the state to interfere with these choices that do not harm others solely on the grounds that some people, even many people, deem the activities in question to be immoral.”

The “paternalist argument”

  • Prof. Collins describe the paternalist argument as; “Gambling is bad for people. It is the business of government to prevent them from doing things that are bad for them. Therefore government should stop people from gambling”. He then goes on to explain that “The argument differs from the “enforcement of morals” argument in that it does not require government to claim absolute knowledge of what is morally right and wrong for everybody, or the right to impose codes of moral conduct on individual citizens who don’t subscribe to them in the area of private morality where people are not harming one another.”
  • Since legalising gambling in the 1960’s, the UK has indulged in a form paternalism in the way it has regulated gambling. This has seen gambling allowed but only in a restricted form. The ambition of government has been to reduce to the risk of harm to people who gamble.
  • Paternalism is at its heart, a reflection of the social contract that government’s have with their citizens. The public allow governments to control their behaviour through legislation which benefits the national good. It is up to government to design laws that benefit the national good without being overly repressive or restrictive. If they get this wrong, at the very least the laws become ignored and at most, the government gets replaced, sometimes violently (though it would be highly improbable that this would happen due to gambling).
  • Collins states “The paternalist argument against legalised gambling [prohibiting gambling because it is harmful], then, seems to fail in part because gambling has not been shown to be harmful for the majority of people who engage in it. But even if it were, government would still not be entitled to prevent adult citizens from accepting the risk – or even the uncertainty – of harm if they judge it to be worthwhile and choose accordingly.”

“The Human Costs Argument”

  • This argument is basically that the cost of people who have become addicted to gambling and the trouble this causes their friends and family outweighs whatever benefits legalised gambling may bring.
  • There is an almost universal consensus that a small proportion of gamblers have an addiction problem and that this has costs to themselves, their immediate family and friends and to society itself. Unfortunately, this is about as far as the consensus goes when it comes to calculating a monetary cost to problem gambling for the purpose of conducting a cost benefit analysis of the activity (the benefits of the industry – taxes, jobs etc. versus the costs in terms of its problem gamblers – medical care, criminality, law enforcement etc.). Such analysis, which might appear unseemly due to the emotive nature of the subject matter, is often used by governments when trying to understand and develop policy. Gambling is no different, if there were to be massive costs to society caused by its liberalisation than there would have been be a strong argument to restrict it.
  • The Gambling Review Body refrained from undertaking a cost benefit analysis, partly because of the difficulties in getting decent data to do so. The Australian Productivity Commission Report 2010 attempted it and came up with the following results:
    • the benefits from tax revenue and the enjoyment of gambling for recreational gamblers ranged between $12.1 and $15.8 billion
    • the costs to problem gamblers ranged between $4.7 and $8.4 billion
    • the overall net benefits ranged between $3.7 and $11.1 billion.
    • The net benefits could be much larger if governments reduced the costs through effective harm minimisation and prevention policies
  • Unfortunately much of the data used to attempt to estimate the cost of problem gambling comes from US sources, which are not only difficult to use as a comparison but in some cases are of dubious veracity due to their authorship by fringe religious groups
  • For the arguments for and against gambling to move forwards there needs to be a neutral body taking the lead in research. Some have suggested that this body already exists in the Government Office for Science which is part of the Department for Business, Innovation and Science (the preferred government sponsoring department for many in the industry). The Government Office for Science has recently conducted research into topics as diverse as tackling obesity, future flooding and mental capital and wellbeing, so problem gambling should not prove a problem.

The “Democratic Argument”

  • The democratic argument is that if the majority of the public don’t want gambling then it should be banned.
  • During the build up to the Gambling Bill in 2004 & 5, the Salvation Army launched a major lobbying campaign against the Bill using a market research survey showing that the majority of the public thought there were enough gambling opportunities already
  • The Methodist Church were not alone in their opposition to the Gambling Bill as many Old Labour MP’s had ideological concerns
  • The Budd Review Body had commissioned their own research as well as considering other research into people’s attitudes regarding gambling regulation; “We do not believe that there is any indication in any of the surveys we have seen that the attitude of the public to gambling has undergone radical change since the introduction of the National Lottery. Attitudes about the acceptability and seriousness of the various forms of gambling do not lead us to believe that there is a public desire for unrestricted access to gambling. The survey which the ONS conducted for us indicates that most people would prefer less accessibility to fruit machines in non-gambling locations. We think that public attitudes should play a part in our recommendations, and we interpret the survey data as encouragement for our view that there should be a cautious approach to relaxing the controls on gambling.”
  • Public opinion does matter when it comes to legislation when it is in the form of political constituency. Many campaigners (and even Budd) wanted children banned from playing gaming machines. Politicians refused this as they realised this would destroy the seaside economy, this meant that seaside MP’s defended the government’s position that they should continue to be able to play. The same could not be said for the concept of Regional Casinos, there was no political constituency for them apart from the potential operators and the local authorities, but these were dismissed as being on the side of ‘greed’. Grassroots political campaigning in the UK is mostly negative (against something, NIMBYism) so unless a campaign is to save something (e.g. jobs) it has little chance politically.
  • Professor Jonathan Wolff believes that there is a natural bias for the status quo in public policy issues that have a moralistic element. He argues that groups advocating change would be better off seeking small incremental change rather than radical change even though it might be necessary. This example shows us is that where the Gambling Act 2005 failed was in its inability to convince public opinion that beyond its role of updating the existing gambling laws to accommodate the 21st Century, the need for a new style of casino was necessary as a tool of regeneration and a fillip to the UK casino industry. The public and Parliament were not convinced, there was no public opinion of a moral wrong being perpetuated by not allowing resort style casino gaming.
  • Tony Blair stated ‘It is a real shame for the places for which no very obvious alternative form of investment will be available. It was the worst form of Puritanism – partisan as well as ineffectual. So people can gamble to their hearts’ content and their wallets’ limit – but not in a brand-new town complex with casino, entertainment centre, sports facilities and shops.’

The “Practical Difficulties Argument”

  • Collins’s final argument against gambling is called the “Practical Difficulties Argument” and is summarised as “There are some negative impacts of legalized gambling potentially so serious that unless they can be prevented, gambling should not be legalised – for example, gambling by minors, money laundering, the rigging of games by gambling companies, the fixing of races and other sports events by bettors and bookmakers, the proliferation of loan-sharking, begging, prostitution, and drug dealing in the vicinity of gambling establishments, the general sleazification of neighbourhoods, et cetera. The negative impacts cannot in fact be prevented except by prohibiting all gambling. Therefore all gambling should be prohibited.”
  • This argument is primarily a US focussed one as it’s in the US that some of the biggest resort casino conurbations can be found and where this argument has been made the most over the years. Admittedly both Atlantic City and Las Vegas suffered from all the negative impacts cited above, but statistics show that nowadays they both suffer from relatively less crime than a city such as New York.
  • The amount of externalities associated with gambling tends to be linked with the quality of the regulation of the gambling. Britain had a period of criminality associated with gambling caused by the bad draughting of the 1960 Betting & Gaming Act. It took the Gaming Act 1968 to clean things up, mostly due to the draconian powers of the new regulator, the Gaming Board for Great Britain. The UK gambling industry has been basically crime free ever since with infitessimal associated externalities.
  • The gambling industry suffers from a public perception image, fostered by lack of knowledge, bias and media stereotyping of which politicians, regulators and the public are victim. An example of this can be found in the recent campaign against ‘betting shop clustering’ where campaigners accused betting shops of being a cause of anti-social behaviour, littering, crime and ruining high streets. What is apparent is that unless this image problem is addressed the public will indulge in NIMBYism against gambling venues at the risk of pushing gamblers either to illegal gambling venues or the less regulated internet.

Conclusion

  • Those who oppose gambling do so for a variety of reasons, some of which are based on less evidence than others and some would appear to be based on pure supposition, yet none can question the vigour with which these arguments are put. The gambling debate, like other moral issues, will always attract the extremes as it mirrors the views of groups who are interested in determining the behaviour of society, whether that be to restrict our behaviours or to allow any behaviour. Fortunately, successive governments, who may all be criticised for taking too long to deal with gambling legislation, have, once they have managed to grasp the nettle, remembered that Britain is basically a liberal democracy, with a plurality of views and that it is not always the loudest voices that need to be heard
  • When discussing the gambling debate there is always the need for unbiased definitive research into gambling and problem gambling. As we have seen, at times, both sides in the debate have accused the other of slanting their research to back up their arguments. In the future, we need the government to step in, conduct the research and provide the answers. Only then can we stop legislation being mauled (as the Gambling Act 2005 was) by those who either had an axe to grind or the majority, who had so insufficient information about the topic that they could not do anything but argue for the status quo.