September 2023: My Letter to Kevin Brennan MP after the Culure, Media & Sport Select Committee hearing where the Gambling Commission gave "evidence" - I point out the lack of evidence on Affordability

Kevin Brennan MP

Member of Parliament for Cardiff West

House of Commons

London

SW1A 0AA

6th September 2023

Dear Kevin Brennan MP

Re: The lack of evidence base for affordability

I am writing to you today because I was so impressed with your performance at the Culture, Media & Sport Select Committee yesterday, interrogating the Gambling Commission and DCMS about their proposals for affordability. Unlike many of your Committee colleagues, you gave no indication of having swallowed the half-truths and propaganda spread by your Parliamentary colleague from Swansea East and rightly questioned these policy proposals which by all measures are extreme, illiberal, unnecessary and significantly change British gambling policy without the proper input of Parliament.

My reason for writing is that I am very concerned that a point that has not been raised so far in your Committee’s inquiry, of which I am aware of, is the almost complete lack of evidence for imposing affordability and at the thresholds proposed. It is truly shocking that such a major cultural and regulatory change should be proposed in this way as it clearly goes against the concept of evidence based policy making, to which the numerous ministers with responsibility for gambling have publicly stated would be the case. Nigel Huddleston MP even assured in the Review of the Gambling Act 2005 Terms of Reference and Call for Evidence published on the 8th December 2020 that:

‘This Review is about using the evidence to assess whether we have the balance of regulation right.’[1]

By way of introduction, I am a management consultant who has specialised in the UK gambling industry for 30 years, many of them focused on providing licensing and regulatory compliance advice. In my time, I have aided in the writing of pre-Blair Labour’s gambling policy, briefed the Budd Review Body, been part of a number of submissions about the then Gambling Bill. I have advised a number of the gambling industry’s trade associations, the British Horseracing Board (as it was then) and was a special advisor to the Culture, Media & Sport Select Committee inquiry into the Gambling Act 2012/13. I was also Secretariat of the All Party Parliamentary Group on Betting & Gaming from 2007 – 2023 and am in my final year of writing my PhD at the University of Salford entitled A Busted Flush? – British gambling policy since the Gambling Act 2005, success or failure? I think it is fair to say that the majority of my professional career has been spent focussed on topics like this.

For the sake of brevity I would like to show you how the Gambling Commission’s Advice to Government - Review of the Gambling Act 2005 published on the 27th April 2023 exemplifies the lack of any hard evidence for the affordability proposals currently under consultation by the Gambling Commission. This document obviously fed into DCMS’s High stakes: gambling reform for the digital age also published 27th April 2023 and an analysis of this is worthwhile but space and time does not permit.

Although I have sought to make this letter as concise as possible, you will appreciate that with all matters like this, ‘the devil is in the detail’ or lack of detail in this case. I apologise in advance for the length of this document but as a scrutinising body, your Committee is hopefully willing to endure such profuse wordage.

The Gambling Commission’s Advice to Government covers its proposals for affordability in Chapter one: Online protections, players and products. In its Key recommendations and actions it states that it will:

consult further on customer interaction and how operators identify customers at risk of financial harm, with a focus on financially vulnerable customers, and tackling binge gambling and significant unaffordable gambling over time, working with Government[2]

This is examined in more detail in the section Online protections recommendation/ action 2: Stronger controls to identify harm where they state:

Individuals spending more than they can afford to lose is one of the harms often associated with gambling. For those accessing treatment and support, financial harms are amongst the most commonly reported categories of harms[3]

For this they cite GamCare’s 2021 CEO’s report which shows 80% of gamblers in treatment, 75 percent of Helpline users and 56 percent of affected others in treatment reported financial difficulties which is hardly surprising as these are people in or dealing with a mental health crisis which has as a symptom excessive gambling which implies excessive expenditure.[4] They then cite the FCA’s Financial Lives 2022 Survey that found that just under half (47%) of UK adults, aged 18 and over display one or more characteristics of vulnerability.[5] What they fail to mention is that the purpose of this survey can be found in the FCA’s definition of vulnerability:

The FCA defines a vulnerable consumer as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care. Characteristics associated with four key drivers of vulnerability (poor health, low capability, low resilience or the impact of a life event) may increase the risk of a consumer’s being vulnerable to harm[6]

The mentioning of the word firm here is critical to the understanding of the survey, it is about the use and abuse of financial products by FCA registered firms. Someone who acts as a carer, has low income or suffers a disability should probably not be offered inappropriate insurance but should not be discriminated against for indulging in a recreation like betting on the horses.

They also cite the Money and Mental Health Institute’s 2019 policy paper Debt and mental health: a statistical update which states: ‘Almost one in five (18%) people with mental health problems are in problem debt, three and a half times the rate among people without mental health problems (5%)’.[7] As with the GamCare report, it is unfortunate, but no surprise that people with mental health issues have financial issues.

The Gambling Commission is using as evidence for the need for universal affordability checks reports based on the unfortunate experiences of either people suffering mental health issues or being poor – the FCA Financial Lives 2022 survey states: ‘Consumers more likely to fall into these groups [financial vulnerability], compared with their opposites, are female; younger; unemployed, working in the gig economy, or on a very low household income; renters; in an ethnic minority group; or living in a more deprived area’.[8]

This may chime with you as you asked the Commission as to why a postcode could be used as an indicator for financial harm to which you got a non-answer. The answer is that companies like CACI.co.uk will supply gambling companies with gross household income and disposable income data based on the postcodes supplied when an online gambling customer registers for an account.[9]This means that these companies, obligated by the Commission’s rules, are forced to discriminate against poorer customers based on the assumption that they can't afford their gambling due to them being poor and ignoring the fact that the best person to decide their own financial budget is the person in question. Affordability infantilises the customer and discriminates against the poor. As the late Professor Peter Collins, a fellow special advisor to your Committee in 2012/13 once said:

“The more fundamental difficulty in trying to prevent the poor from gambling is a moral one, for it amounts to saying that poor people lack the intelligence and self-control to be able to decide for themselves how to spend their own time and money…Worse, it presupposes that poor people may legitimately be subject to paternalistic government that takes away their fundamental dignity as autonomous moral agents entitled to choose for themselves how to live even if they no less than richer people will often make bad choices.”

The Commission go on to argue that in their case work, they have come across grievous examples of where customers have lost significant amount of money in a short time:

Our compliance and enforcement casework has identified instances where customers have been able to spend many thousands of pounds in short periods, including minutes, without any checks. These very extreme cases are relatively rare but can have very significant impacts on the consumers affected. For example, in a relevant case, a customer lost £4,000 in six minutes following sign-up.[10]

It should be stated that it has been possible to walk into a bookmaker or casino and lose thousands of pounds within in minutes since 1961 for the bookmaker and 1968 for the casinos. Staking large amounts and losing large amounts is integral to gambling and while the majority of people gamble only small amounts, a minority like to gamble large amounts infrequently. One of my best friends is a tax partner at a big four firm, loves horseracing, bets about six times a year and stakes about £5,000 each time. He is in no way a problem gambler, yet according to the Gambling Commission he is at risk. This is because they have adopted the ideology that people who bet even relatively modest amounts of money must be at risk, when the history and the evidence shows that this is only the case for a very small number of people who have mental health issues. As they say ‘These very extreme cases are relatively rare’.

What is also ridiculous about this casework is that it is: a) just one example from 32,000,000 active gambling accounts in the UK, b) The average number of cases investigated by the Commission each year is about 102. This is not random but either thematic or based on concern. As there are 435 online operators out of a total of 2,442 licensed operators, the Commission is investigating 4% of all operators, what we don’t know is the split between online and offline, but it suggests that the number of cases being investigated is very low compared to the number of gambling transactions happening.[11] This obviously doesn’t imply it is representative of the total picture but as it’s the only case study provided, this does imply it is a very rare example, as they admit.

Furthermore, the fact someone lost a large amount of money in a short period of time is a marker of harm indicator that operators have had to have systems in place to monitor and act on since the introduction of the Customer Interaction policy in the Gambling Commission’s Licence Conditions and Codes (LCCP) of Practice Social Responsibility Code 3.4.1 introduced in July 2019. What this case study shows that an operator's systems were not working and the need for regulatory sanction, definitely not evidence for the need to bring in this extreme affordability measures.

It does also need saying that however disingenuous the Gambling Commission believe they can be over the topic, affordability without Commission set thresholds was obligated by the Commission in Guidance notes attached to the same LCCP 3.4.3 in July 2019. There is copious amounts of written evidence of the Commission imposing it, providing advice on it and sanctioning operators for not imposing it. To say it was a commercial decision by the operators is pure fabrication and it is only that the Commission has the industry scared for their licences that they have not sought legal action against Mr Rhodes for his outright falsehoods. I will be most happy to supply you with the evidence should you wish to take his Trumpian behaviour before your Committee further.

When arguing for financial checks to be made on losses over time, the Gambling Commission provide another case study of: ‘where a customer lost £35,000 over two months without sufficient checks being carried out’.[12] Again we are given a solitary example, with no context which looks like an error being made by an operator, which if due to negligence should rightfully be punished. But the implication here is of harm and there is no evidence that harm has occurred. We do not know if this gambler is a multi-millionaire or a problem gambler, the fact that there is no context suggests that there is no evidence of harm. What is says is that an operator failed in its regulatory obligation. Again, this is not evidence of the need for further intrusive regulation.

The next evidence supplied is in the section appropriately entitled Setting threshold levels for assessment checks.[13]This cites the 2016 combined Health Survey which states that ‘the percentage of gamblers/bettors at moderate risk was 8.4 percent and the percentage of problem gamblers was 3.5 percent’.[14] These numbers are obviously chosen to show a heightened risk from online gambling. There are some issues with these figures which are best exemplified by the following table taken from the report:[15]

Table 5:4 Number of problem gamblers according to DSM-IV, PGSI or either

Problem Number in population 95% confidence interval

gambling Lower Upper

measure

DSM-IV 290,000 200,000 410,000

PGSI 230,000 160,000 350,000

Either DSM-IV or PGSI 340,000 250,000 460,000

Calculating the number of problem gamblers in the population is done by undertaking a representative population survey, in this case of about 6-8,000 adults and asking them to complete a questionnaire. This questionnaire will take the form of a number of questions about their gambling, their responses get scored and from their aggregate score they get categorised as no risk, low risk, moderate risk and problem gambler. There are two different types of questionnaire – known as problem gambling screens, one called PGSI, the Problem Gambling Severity Index and one called DSM-IV after the American Diagnostic and Statistical Manual of Mental Disorders, fourth edition. According to this report, it was found that neither screen fully collected the data so it was decided to have a third option, either DSM-IV or PGSI. How this is calculated is not stated, all we can see is that it dramatically increases the number of problem gamblers, an increase of 47.8% from the PGSI figure.

The figure of 3.5% of online problem gamblers stated by the Gambling Commission is taken from Table 5:5 Problem gambling prevalence according to either DSM-IV or PGSI , by activity.[16] Unfortunately, this report does not provide problem gambling prevalence by activity by the PGSI or DSM-IV screens alone, thus not allowing us to look at this figure through the conventional means of assessing the data.

What the report does state quite clearly though is that:

The highest rates of problem gambling were among those who had played machines in bookmakers (13.7%), participated in betting offline on events other than sports or horse or dog racing (13.1%), reported another gambling activity not covered by the survey question (11.6%), betting offline on dog racing (9.5%) and online gambling on slots, casino or bingo games (9.2%). These were all low participation activities.[17]

None of which suggests that online betting customers or to an extent, due to its low participation rates, online gaming customers should suffer financial intrusion, but that’s if this report can be believed. The full name of the report is Gambling behaviour in Great Britain in 2016 - Evidence from England, Scotland and Wales, produced by NatCen for the Gambling Commission and published in 2018. The reason for casting doubt on its accuracy is a comparison with its predecessor report, written by the same people, Gambling behaviour in Great Britain in 2015 published in 2017.[18] This 2015 report shows the following estimates for problem gambling compared to the 2016 report:

Problem Number of problem gamblers in the population % difference

Gambling Gambling Behaviour Gambling Behaviour

Measure in Great Britian 2015 in Great Britian 2016

DSM-IV 365,288 290,000 -20.6%

PGSI 303,379 230,000 -24.2%

Either DSM-IV

or PGSI 429,708 340,000 -20.1%

Source: Gambling behaviour in Great Britain in 2015, p.44 & Gambling behaviour in Great Britain in 2016, p.71

Not mentioned anywhere, either in the 2016 report or by the Gambling Commission that the estimates for problem gambling had dropped from 2015 to 2016 by a rather significant 20%. It is not unfair to state that this at least casts some doubt about the accuracy of the data included in these two reports on problem gambling, which were never repeated. Thus, I can only suggest caution when considering any estimates on problem gambling from these sources.

The Commission then reference the Health Survey for England 2018.[19] This was also a survey undertaken by NatCen, this time on behalf of the NHS. It also uses the Either DSM-IV or PGSI classification and also does not allow us to compare like with like when looking at problem gambling numbers for online gambling. However, to reiterate the difference between the three methods of estimating problem gambling numbers:

Table 15 Number of problem gamblers (according to DSM-IV, PGSI, or either)

Problem Number in population 95% confidence interval

gambling Lower Upper

measure

DSM-IV 223,975 124,278 323,673

PGSI 168,149 102,185 234,113

Either DSM-IV

or PGSI 245,634 155,907 335,361

Source: Health Survey for England 2018 – Supplementary analysis on gambling[20]

Direct comparisons cant be made with the Gambling Behaviour in Great Britain 2015 & 2016 because this survey is for England only, but again we see the difference between the number of problem gamblers indicated by the PGSI screen and the equally undefined Either DSM-IV or PGSI measure is an increase of 46%. Such a large number does seem to suggest further questions need to be asked.

One question that definitely needs asking is why the Gambling Commission don’t mention anywhere is their own Quarterly Telephone Survey using the PGSI mini-screen. While they don’t break out the data for online gambling, which Gambling Behaviour in Great Britain 2016 gives a problem gambling rate of 4.5% for online and the health Survey England 2018 gave a rate of 4.2%, the total figures given in the table below suggests that the may be some discrepancy:

Results of the Gambling Commission’s Quarterly Telephone Survey using the PGSI mini-screen.

2018 2019 2020 2021 2022

Low risk 3.3% 2.7% 2.0% 1.9% 1.7%

Moderate risk 1.5% 1.2% 0.9% 0.8% 1.3%

Problem gambler 0.5% 0.6% 0.3% 0.3% 0.2%

Source:[21]

The Gambling Commission believes that the national surveys examined above are more robust, which is odd, ignoring the obvious methodological questions raised above, but because these survey results would appear to show that strengthening of the regulations that the Commissions has been repeatedly undertaking over the last few years seem to be working. Which you would seem to think of as a success. However, the Commission is undertaking a massive overhaul of the way its problem gambling surveys are undertaken as the current method is inadequate, which does in turn throw some shade on the prominence of this data as evidence for regulatory change.[22] Bizarrely, the Commission seems to already have pre-judged the outcome of the new research before it is even undertaken, which may suggest that actually a high rate of problem gambling, however contrived, suits the Commission’s own agenda. Ian Angus, Director of Policy at the Gambling Commission stated at the Westminster Media Forum in April 2023:

“Whilst our current figures show the overall problem gambling rate is statistically stable at 0.2%, the pilot data suggested that rate for participants was 1.3%. The figures are different. We make no apology for that”.[23]

A 550% increase in the problem gambling rate will either prove the Commission has been a complete failure or give it the ammunition it needs to seek even more stricter regulations on gambling which appears to be its ideological goal.

Having so far alluded to problem gamblers, the poor and those suffering other mental health issues, two by their own admittance very rare examples of operator errors and some methodologically questionable numbers about problem gambling rates, the Gambling Commission now move to their core argument. They have used it numerous times when arguing for and dealing with affordability checks over the years, namely that the British public doesn’t have an disposable income to afford to gamble with.

Citing its Remote customer interaction requirements and guidance from 2020, the last time the Commission tried to impose affordability thresholds on the public.[24] They found, using market research that 54% of people had less than £250 discretionary data per month.[25] They also found that for online gamblers, ‘within a given month, approximately 15% of active customers lose more than £150, and 2% lose more than £1,000’.[26] While they didn’t suggest a figure for what affordability should be set at in this consultation, they did state that £2,000 would be far too high and that they would want a ‘threshold considerably below this’, but did give a floor of £100 spend per month.[27] They also stated that once an affordability check had been undertaken ‘Operators would then be expected to take appropriate action based on the result of the assessment, such as setting tailored deposit limits (sometimes described as a hard stop or a handbrake)’.[28] The assumption was very much that anything but recreational gambling must be considered beyond the pale and for operators to rein it in as it was symptomatic of problem gambling, even though this is generally not the case.

This 2020 consultation is the same document where the Commission considered what they would do if customers moved to the black market due to the imposition of affordability thresholds, which does show a certain level of complacency:

Possible Unintended Consequences Possible mitigations

That consumers are unhappy with - Building a culture where customers expect

allowing access to private information consistent checks at set thresholds.

such as affordability data or information - The Commission provides information to

about vulnerable situations. consumers on the checks that may occur to

help build this culture, which operators can

refer to consumers.

- Thresholds for affordability are set at a level

which is reasonable and evidence-based.

Source:[29]

It is also a consultation that received over 13,000 responses, none of which has ever been made public and to my knowledge these responses where never shared with the DCMS Gambling Review.[30] It is also the document which mentions the Canadian Centre on Substance Use and Addiction’s Lower-Risk Gambling Guidelines which will undoubtedly become the Gambling Commission’s next objectives, as mentioned by your Committee colleague, the member for Ealing Central and Acton, these guidelines are:

Gamble no more than 1% of household income before tax per month.
Gamble no more than 4 days per month.
Avoid gambling regularly on more than 2 types of gambling.[31]

Guidelines are one thing, but considering the ideological bent of our gambling regulator, there is some talk that this could be the next regulatory ambition of the Commission. They are completely ambivalent to the potential of a black market and the harm that this will cause.

The final piece of evidence provided by the Commission is described as:

‘The binge gambling and significant losses over time information has been estimated following an industry data request which covered approximately 19 percent of all active remote gambling accounts in the May 2020-April 2021 period’[32]

Regardless of the fact that the data was ‘from a range of operators representing approximately 5.86 million active accounts from the period from May 2020 to April 2021. The data shows the number of accounts reaching certain net expenditure limits during a range of periods’ and upon inspection shows little more than totals.[33] The real issue is the timing of the data collection – the absolute height of the Covid-19 lockdowns when live sport was suspended for long periods of time, completely altering the number and way people gambled. Data exists from previous years, so one has to question why the Gambling Commission shoes to use this dataset and not make any reference to it being unique and aberrant.

What is being proposed by the Gambling Commission, for it is their advice to Government that has been accepted in its entirety by DCMS and is now a consultation by the Commission, is the biggest change in gambling policy since the passing of the Gambling Act 2005. It is definitely the biggest change in gambling policy to be initiated by an unelected body and if implemented, without any scrutiny by Parliament. It is your Committee that is the only oversight on this illiberal and unnecessary regulation. Such a regulation is a first in the history of gambling since the 1664 Gaming Act otherwise known as An Act against deceitfull disorderly and excessive Gameing that made all bets over £100 (£15,160 in 2023) null and void.[34]

To conclude about the quality of evidence being used to introduce this cataclysmic change to gambling regulation, I wish to use an analogy and pretend that the Gambling Commission is attempting to prosecute someone for murder. Their case is based on the accused being in the same city as where the murder took place, being of the same skin colour and rough estimation of height that a witness from 500 yards from murder took place and claims seeing the perpetrator and little else. If this were a court of law, the Gambling Commission’s case would be dismissed for a lack of evidence and the Commission possibly disbarred for an abuse of process.

The unintended consequences of the implementation of affordability thresholds is the black market. Although the Commission dismissed this threat, one only has to look at what is happening in countries in Europe that have brought in similarly restrictive measures. In February 2022, the BGC published research that showed Norway’s black market was estimated to be >66%, France was 57%, Italy was 23% and Spain was 20%. Denmark had recently restricted bonuses which led the tax authorities to predict an increase of 9% in the black market and a survey of Swedish gamblers who had self-excluded from licensed operators, found that 38% were playing with black market sites. [35]

Again, I apologise for the length of this letter, but I am seriously concerned that this issue is not receiving the attention that its due. Please do not hesitate to get in contact with me if you have any further questions, my email is

sdonoughue@gamblingconsultant.co.uk

Yours sincerely

Steve Donoughue MBA

[1] https://www.gov.uk/government/publications/review-of-the-gambling-act-2005-terms-of-reference-and-call-for-evidence/review-of-the-gambling-act-2005-terms-of-reference-and-call-for-evidence#ministerial-foreword

[2] https://assets.ctfassets.net/j16ev64qyf6l/6ZYFtWrK3D7XhxbtcK9KFB/2c967fe64289d8313646fc48d6271b8e/Gambling_Commission_full_advice_to_Government_Review_of_the_Gambling_Act_2005.pdf p.20

[3] Ibid p.23

[4] https://issuu.com/tgdh/docs/j017147_-_gamcare_annual_report_trustees_2021_web?fr=sMGIwMDQzMDM2OTg p.23

[5] https://www.fca.org.uk/data/financial-lives-2022-early-survey-insights-vulnerability-financial-resilience

[6] https://www.fca.org.uk/publication/research/financial-lives-survey-2020.pdf p.191

[7] https://www.moneyandmentalhealth.org/wp-content/uploads/2019/03/debt-and-mental-health-policy-note.pdf p.1

[8] https://www.fca.org.uk/data/financial-lives-2022-early-survey-insights-vulnerability-financial-resilience

[9] https://www.caci.co.uk/datasets/paycheck/