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The UK's Gambling Commission - April 2010

When the last week of May 2010 arrives, Britain will have its new Minister for gambling at the Department for Culture, Media & Sport (DCMS) and one of their first tasks will be a rethink of the role of the UK’s regulator, the Gambling Commission.

The three weeks following the General Election on May 6th will most likely have been used by Party leaders to organise a coalition government and then dole out the Ministerial posts. If they are handed out in order of political seniority, the man or woman with the responsibility for the future of Britain’s gambling industry will get a phone call last of all.

As the primary portfolio responsibility will either be Sport or Tourism, gambling won’t be on the first page of the new Minister’s briefing notes, possibly on the second, but more likely on the third. We can guarantee though that there will be one item on it and that’s the future of the Gambling Commission.

Widely unloved, the Gambling Commission has managed to underwhelm politicians and operators alike since it first took over the reins of gambling regulation from the Gaming Board for Great Britain on the 1st October 2005.

Much of this scepticism may be rooted in the fact that the Commission is still a relatively new regulator, still finding its feet after the loss of much organisational knowledge of the industry as a result of being uprooted from London to Birmingham from London.

A Hampton Implementation Review of the Commission ‘found some conflicting views within the Commission as to the extent to which it is responsible for setting a regulatory framework within which (other things being equal) members of the gambling industry can operate effectively as businesses. While some staff accepted this, other parts of the Commission appeared to the Review Team to be less comfortable with this role. We [the Review Team] believe that this may be partly due to perceived sensitivities regarding the ethical issues associated with the gambling sector’[i].

The gambling industry’s struggle to enlighten their regulator that gambling is not the embodiment of all evil, as some less knowledgeable bureaucrats perhaps believe, has been an ongoing one.

Yet such industry concerns do impact upon politicians, especially those in the frame for the new Minister’s job. Tobias Ellwood, Conservative candidate for Bournemouth East, who has been Member of Parliament there since 2005 (maj. 5,244) is the favourite as he was previously the Opposition Spokesman on Gambling

Ellwood has not shown a huge amount of interest in the industry, being keener on tourism and defence issues, but he has dutifully met with enough operators to appreciate their anxiety about the Commission’s style. Still, as a Tory defender of small business he is more likely concerned about the industry’s other bugbear about the Commission; the rising cost of regulation.

In the short period of four and a half years since the Gambling Commission started, staff numbers have increased 270 percent, running costs[ii] have increased 230 percent and fee revenues[iii] a staggering 492 percent.

While this has been painful for the industry, the key issue for any new Minister is that even though fee income has almost quintupled, the Commission, which is supposed to be self-financing, is costing more than it earns and DCMS is having to bail it out.

In 2009, it overspent by nearly £2.5m, down from a deficit of over £5m the year before, but in a new ear of austerity few expect this profligacy will continue unchecked.

Already In the March 2010 Budget, the current Chancellor announced that as part of departmental efficiency savings, DCMS would be merging the National Lottery regulator with the Gambling Commission.

The National Lottery Commission costs £5.8M [iv] to regulate its one licence holder, compared to the £15.3m it costs the Gambling Commission to regulate its 4,166 licensees, so the case for merging the two is irresistible for purely financial reasons.

The question will be what to do with the 43 staff that presently look after Camelot.

This will mean a change in structure and personnel, but a question mark still hangs over the potential savings. If all the 238 employed in the Gambling Commission are fully employed already then few significant savings are likely be had by just moving them all into one office.

The new second favourite for the big chair in Cockspur Street (albeit by wide big margin), is Dr Don Foster, the Liberal Democrat candidate for Bath and incumbent MP (maj. 4,638).

Foster could possibly get the post if a coalition saw this lowliest of Ministerial positions handed out as part of the deal. The Lib Dem’s spokesman on gambling is well qualified to do the restructuring needed at the Commission as an ex-management consultant with third string accountancy firm PKF.

Don’s main expressions of interest with regard to gambling have been to do with the prevention of problem gambling, underage gambling and crime - a set of concerns very much front of mind for Commission observers as the regulator struggles to publicise its crack down on illegal machines and betting in pubs, in the absence of a solitary single conviction for any gambling offence.

Confronted by questions about what exactly they have been doing to address the nationwide scourge of illegal poker clubs, the Commission’s anecdotal response has been that are hesitant to get involved in something they see as an issue for the local authorities, and are reluctant to create a dependency on them for enforcement duties.

Some watchers see a bureaucratic turf war in the making that could open the way for larger issues of criminality, hopefully not reminiscent of those in the 1960’s which were so dramatic they caused a new regulator to be created (the Gaming Board).

The final candidate for Minister would be an unknown Labour MP, as the present Minister will likely not survive if Gordon Brown wins his first election.

A young Mandelson protégé will probably get the call and he will have to deal with the other reason for needing to sort out the Gambling Commission, online gambling.

At present only the foolhardy are licensed for remote gambling in the UK. Not because of regulation but because of prohibitively high tax levels that Gordon imposed in one of his last acts as Chancellor.

DCMS is currently holding a consultation to see if the law should be changed so that those in offshore jurisdictions should have to apply for a licence if they want to advertise to British punters.

All politicians know the Commission dropped the ball with their enthusiastic and idealistic embrace of whitelisting and mutual recognition, but options to sanction an independent regulator are limited and there is much scope for political collateral damage.

If there is the political will at DCMS, this can be an opportunity for the new Minister to shake things up in Victoria Square and inspire a proactive Commission, one which supports the industry and regulates effectively and cost efficiently, but that objective may yet be sidelined as the new minister focuses on their ‘big headline’ manifesto commitments first, leaving the needs of the gambling industry will be way down the list.

In that situation then the odds that some major criminal activity might become the reason for gambling to be re-regulated shorten considerably. It could well be the 1960’s all over again.

References

  1. http://www.bis.gov.uk/files/file50888.pdf p.7
  2. Since the Gambling Commission issued accounts for the second half (6M) of 2005, we have had to assume that costs for the full year were twice those reported i.e. £6.6M
  3. Since the Gambling Commission issued accounts for the second half (6M) of 2005, we have had to assume that fee revenues for the full year were twice those reported i.e. £2.6M
  4. 2008/09 Annual Report