From Constraint to Competition: 50 Years of Change in British Gambling Policy

Abstract

Introduction

This article provides an overview of the fundamental change in the British government's approach to the regulation of commercial gambling that has taken place over the past half-century. This change can be simply summarized: it comprises the replacement of a policy of constraint, designed to inhibit any expansion in opportunities for persons to gamble, with one of competition, in which operators may, subject to a sophisticated, but essentially permissive, regulatory regime, be licensed to provide such facilities for gambling as they consider commercially viable. But to understand the shifts in government policy concerning the regulation of commercial gambling in Great Britain over the past 50 years, it is necessary to go back one further decade, to the Report of the 1949–51 Royal Commission on Betting, Lotteries and Gaming.1

The 1920s and 1930s had seen a continuing expansion in the commercial gambling media that had developed in the nineteenth and early twentieth centuries. These included gaming machines, greyhound racing, the football pools, the Tote (the Horserace Totalisator), bingo, newspaper prize competitions, and the widespread promotion of private “good cause” lotteries, along with a vibrant, if illegal, off-course cash betting market. These combined to constitute what the 1951 Royal Commission regarded as an unremarkable feature of everyday life. For the Home Office, responsible for domestic policy in this matter, this expansion aggravated the long-standing difficulties it had faced since the mid-nineteenth century in formulating a clear and workable approach to disputed points of detail on which it could, in particular, advise the police; prohibition being the preferred option. In practice, the implementation of anti-gambling legislation had comprised an awkward trade-off between the Home Office's preference for a quiet life, police concern about the resource implications of its enforcement (notably in respect of street betting), and the more or less constant public grumbling by anti-gambling groups.2 This trade-off was made more difficult to manage during this period by the emergence of a wider group of sporting and business interests ready to argue that their gambling promotions were harmless fun.3

The anomalies embedded in the law as a result of a century of uncertain enforcement were matters of comment by the 1932 Royal Commission on Lotteries and Betting. Although its only legislative product was confined to the “small lottery” problem,4 this Commission remains notable for its radical rejection of the prevailing policy ethos:

the general aim of the State in dealing with facilities for organized 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.5

The substantial increase in betting expenditure that followed the end of the Second World War revived the government's interest in the fiscal possibilities,6 but taxation did not figure in the terms of reference set for the 1949–51 Royal Commission. These were “to enquire into the existing law and practice thereunder relating to lotteries, betting and gaming, with particular reference to the developments which have taken place since [1933], and to report on what changes, if any, are desirable and practicable.” The Commission expressly endorsed the libertarian stance adopted by its predecessor.7 In a chapter entitled “The Social Effects of Gambling,” it rejected the view that either by abstract argument or experience, gambling, when taken in moderation, causes any serious harm to the players, their families, or their community. Drawing on a well-established analogy, the Commission concluded,

It is the concern of the State that gambling, like other indulgences such as the drinking of alcoholic liquor, should be kept within reasonable bounds, but this does not imply that there is anything inherently wrong in it.8

This emphatic rejection of one of the main planks in the anti-gambling groups' objections to gambling signaled the demise of any government view that the function of the law in this matter was to enforce a particular moral stance on an individual's use of their leisure time. In this respect, the Commission's recommendations constituted a landmark in the state's understanding of a socially pervasive and pan-class leisure activity. They also anticipated the legislative changes of the late 1960s, concerning the state's response to private sexual conduct between consenting adults.9 The Commission's treatment of gambling as a secular matter of social regulation was, at a more general level, symptomatic of the post-war development of the regulatory state.10

Despite the clarity and persuasiveness of the reasons for them, the Commission's recommendations were not enacted until 1960. Within Parliament, there was a strong contingent of anti-gamblers, in particular in the House of Lords. In the Commons, a vocal group of MPs sided with the bookmakers against what they regarded as the Jockey Club's arrogant assumption that the working man's betting should underwrite the landed aristocracy's desire to maintain and race expensive horseflesh. Eventually, the racing industry became reconciled to the fact that there would be no Tote monopoly, their disappointment being tempered by the Home Office's alternative, to introduce a betting levy on stakes, which would be hypothecated to the support of the industry. For their part, the bookmakers accepted that the government's wider concerns with social order meant that it was committed to the implementation of the Royal Commission's recommendations. The Betting and Gaming Bill was introduced in October 1959 and received the Royal Assent in July 1960.

In the 50 years that followed what the Prime Minister, Harold Macmillan, described as a “long overdue” social reform,11 four key dates stand out: 1968, 1994, 2002, and 2005. The article now falls into three sections:

Regulation as a constraint on the supply of and demand for gambling products

Creating a demand for a single gambling product

Regulation as the facilitator of competition in the supply of gambling products

Regulation as a Constraint On Both The Supply of and Demand for Gambling Products

“The object of gambling legislation should be to interfere as little as possible with individual liberty to take part in the various forms of gambling but to impose such restrictions as are desirable and practicable to discourage or prevent excess.”12

The new regime and its philosophy

The new regime came into effect on Jan. 1, 1961. It created a single, regulated betting market that included the extant lawful on- and off-course cash and credit bookmakers and any formerly illegal street bookmakers. While we might applaud the irony of the introduction of the statutory test for a bookmaker's permit, which meant that street bookies were in effect demonstrating their competence on the basis of their former illegal activities, there was a clear legislative ambition. Spartan in their appeal, licensed betting shops were intended to respond only to an unstimulated demand for off-course cash betting. As the 1978 Royal Commission on Gambling was later to show, this was both a problematic notion in principle, and in practice had the effect of embedding repeated play.13

By contrast, while the 1949–51 Royal Commission had not been unduly concerned about gaming,14 it was very clear that banker's games held the potential for exploitation even of the experienced player. It specifically recommended that gaming should be unlawful where, by reason of the nature of the game, the chances of all the players were not equal or the casino management had a financial interest in its outcome. Fully implemented,15 its recommendations would have severely restricted the games that a casino (as the banker) could offer and may have stayed the proliferation of casinos that followed in the 1960s. But the Act did not go as far as this. While it permitted commercial gaming under strict conditions, it also contained some minor concessions, one of them intended to permit small scale gaming in members' clubs, and for worthy causes. The “Vicar's Charter” proved to be “a lamentable failure.”16 Within months of the Act's commencement, casinos were “flourishing like weeds in many parts of the country”17 as their managers sought to exploit this and the Act's other concessions for commercial purposes.18

The unseemly and resource intensive sequence of police raids, prosecutions, convictions, and appeals as the authorities sought to close each new loophole was brought to a stop by the Gaming Act 1968. When established, the Gaming Board for Great Britain was given powers unusual in their imagination and scope. While a number of its detailed aspects were subsequently relaxed, the Board remained throughout its life a paradigm of industry-specific regulation.

The regime that the 1968 Act introduced was predicated on two notions. The first was that unregulated commercial gambling creates expensive social costs. This may be expressed in terms of three incidents of market failure. Regulation was needed:

to control externalities (for example, criminal exploitation of players, the commission of crime for the purpose of play, and third party harms arising from excessive consumption)

to correct information imbalance and deficits (for example, there is widespread player ignorance of probabilities, and game operation and financial information and control are entirely in the hands of the supplier), and

to guard against consumption by those who may be unable to cope and/or whom social values conceive are inappropriate consumers within this market, in particular children

These objectives were met in the 1968 Act by the imposition of rigorous supply-side controls, vetting the quality of entrants to the casino market (certificates of consent and certificates of approval), and monitoring the performance of casino management against statutory and soft law standards. In the event of non-compliance, the Gaming Board could prompt sanctions involving the operator's temporary or permanent exclusion from the market.19

The Act was premised, secondly, on the notion that the libertarian function of government was to provide such opportunities for players to gamble as would meet that demand which would otherwise be satisfied by an unregulated market; beyond that, it was not the function of government to stimulate the market. The Act's demand-side controls famously limited the areas in which casinos could be located, required players to be members of what were normally proprietary clubs and to wait for 48 hours before first gaming, and placed restrictions on credit within the casino. It also prohibited operators from arguing for additional or extended gaming licenses on the basis that these would stimulate demand; unlike other regulated industries, and unlike the current regime, this was not intended to be a competitive market for the gambler's pound.

The commercial gambling market 1968–1994

In the decades following the 1960 Act, bookmakers and the racing industry sought to get to grips with the new regime. Given their common, but also disparate, interests in the health of Britain's horseflesh, they were always likely to be at odds when negotiating with the Home Office about the annual levy scheme.20 But the betting industry only came to question the policy underlying the regulatory regime some 20 years later.

Similarly, the decade following the commencement of the 1968 Act was a steep learning curve for the Gaming Board. Key aspects of the legislation were deliberately indeterminate, most notably the “capable and diligent” test for certificates of consent. Contact with the Gaming Board during this time confirms the impression of a regulatory agency working to the limits of judicially approved standards of fairness while dealing with acquisitive and sometimes devious operators. Its unshakeable belief in the need for vigilance was amply vindicated by the “casino wars” of the 1970s. While there were some changes of detail later, these notions underpinned the regulation of casino gaming, machines, and bingo for the next 30 years.

But the regulatory implications of the policy of unstimulated demand varied according to the propensity of the gambling medium to encourage continuous, rather than discontinuous, play. For well over a century all lotteries had been illegal, as they continue to be unless authorized by statute. But over time, and reflected in gradual legislative change, participation in non-commercial “good cause” lotteries had become a major feature of social life. Lotteries present their own regulatory issues, though they are generally not regarded as carrying the same potential for harm as, say, gaming machines (but note the concern about lottery scratchcards). And lotteries also present tricky questions of law, notably on how they may be distinguished from lawful prize competitions, a distinction that continues to trouble the Gambling Commission, the regulator established by the Gambling Act 2005.21 The harm against which legal policy was directed was, in essence, to eliminate as far as possible the opportunities for lottery promoters to defraud either the players or the cause that the lottery sought to support. This policy could likewise be realized by the regulation of a lottery's promoters and of its financial arrangements, but not always, as the 1978 Royal Commission found, successfully.

In the 1970s, however, we see the beginnings of a shift in government policy in respect of lotteries as a contributor to the local economy. The catalyst was the 1973 Witney Report.22 Established to examine the whole area of lotteries, its radical recommendations were that local authorities should be given powers to promote lotteries for the benefit of their communities, and that charitable, cultural, local amenity, and sports associations should be able to benefit from “large lotteries” licensed by the Gaming Board. With some amendment, its proposals were enacted in the Lotteries Act 1975, consolidated with cognate areas of law in the Lotteries and Amusements Act 1976. The Lotteries Act 1975 marked a turning point in government policy towards the propriety of the lottery as a legitimate means of raising money for local public goods. It was, of course, the ideological precursor of the National Lottery, launched two decades later.

1994: Creating a Demand for a Single Gambling Product

When the Royal Commission on Gambling reviewed matters in the mid 1970s, it did so largely as an administrative exercise that did not seek to question commercial gambling's moral, social, or even economic value. Its view was, nevertheless, one of an activity, which, if it were to go away, would not cause many to lose much sleep, but as this was unlikely, a firm regulatory grasp was desirable. This was especially so in the case of the external management of local and societies' lotteries, where the situation had become “scandalous,” involving “commercial exploitation to a totally unacceptable degree, gross lack of security and, we strongly suspect, a good deal of plain dishonesty.”23 Of the total of 303 recommendations for the better management of the entire commercial gambling market, nearly a fifth (63) concerned lotteries. Many of these, as well as many of its recommendations designed to ease the burden of regulation on the industry as a whole, were introduced over the succeeding years, but none challenged the underlying philosophy.

With the exception of the policy shift in respect of the public lottery, there had been little change in the regulation of betting and gaming since the two controlling statutes of the 1960s. But thirty years on, viewed against the radical changes of the deregulation agenda of the 1980s, which saw the privatization of the utilities (gas, water, electricity, and telecommunications), and the transformation of the regulation of financial services,24 the restrictive regime under which both industries operated had become increasingly anachronistic. They lobbied hard for reform. While it adhered largely to its underlying policy, the Home Office supported a sequence of quite substantial changes in the regulatory environment. Many of these were made under Part I of the Deregulation and Contracting Out Act 1994, a measure that was itself a product of the Conservative government's desire to hold “a bonfire of red tape,” an Act which permitted primary legislation governing all forms of business to be amended by statutory instrument. Given the churches' opposition to both this and the Sunday Trading Act 1994, perhaps the most significant of these changes was that it was now possible to hold race meetings and to bet on a Sunday. Many other changes followed,25 but the shock to the system was John Major's own “Big Society” idea:26 the National Lottery, launched in 1994. While unstimulated demand was the operating principle, the economic strength of the commercial gambling market in Great Britain had not been especially important to successive governments.27 The National Lottery marked a radical transformation in gambling policy: it was now in the public interest to promote mass participation in gambling for good causes. In terms of this review of government policy, two consequences stand out. One was to compromise the continued legitimacy of the regulatory policy governing the existing market. The Gaming Board in particular found itself seeking to hold to a regime for which it was statutorily responsible, while the government of the day was, arguably, undermining the very objective which that regime had traditionally sought to realize.

Its introduction also gave greater urgency to the industry's deregulation agenda. Evidence of the displacement of gambling expenditure from existing products to the Lottery was equivocal.28 But the very existence of its statutorily privileged position meant that there would “continue to be pressure from the rest of the gaming industry seeking change to compensate for the impact of, and freedoms given, to the National Lottery.”29 This was so even if the commercial gambling industry missed the point when it argued for a level playing field. The National Lottery etc. Act 1993 required the National Lottery Commission and the Secretary of State to “do their best to secure that the net proceeds of the National Lottery are as great as possible.” The whole point was that there should be two playing fields; one of which was for the monopoly provider alone and which would have better playing facilities.30

And this point was institutionally reinforced by the creation of a new government department—the Department for National Heritage—or as its first Secretary of State dubbed it, “The Ministry of Fun”—whose purpose was, inter alia, to promote the Lottery. This was perhaps the clearest signal that government policy had, in this respect, fundamentally changed. Far from the notion that commercial gambling opportunities should seek only to meet an unstimulated demand for them, the operating premise underlying the Lottery was precisely to create a demand for this single gambling product and to capture the consumer surplus thereby generated.

Regulation as the Facilitator Of Competition in the Supply of Gambling Products

Preparing the ground: the Gambling Review Body

The impetus for the gradual loosening of the regulatory ties was endogenous; it grew from within the betting and gaming industries and was promoted by their trade associations with Home Office support that reflected a shift in its thinking about their social (as distinct from their economic) value.31 The gaming sector in particular was no longer a pariah industry, run by the least attractive of capitalism's wealth creators, but, as the Chairman of the Gaming Board, Peter Dean, commented in 2001, part of the “mainstream leisure industry.”32 These reforms also signified the government's acceptance that within a regulatory framework guaranteeing the probity of the promoters and the integrity of the games, there was room both for credible self-regulation and competition between them.

But the piecemeal nature of these reforms had prompted a growing concern about the consequences of selective deregulation, graphically described by the House of Lords Select Committee on Delegated Powers and Deregulation as “salami slicing,” a concern shared by the Gaming Board:

One problem in relaxing any sector of the law by “salami slicing” is that it becomes unclear as to when the principles governing the legislation are being fundamentally undermined. In our assessment of the present proposal, we do not think that this point has yet been reached. But the piecemeal relaxation of the gaming laws by means of the deregulation procedure is clearly unsatisfactory, and, in the strong view of this Committee, the legislation is now due for review.33

Established in 2000, one of the Gambling Review Body's tasks was to address the increasing incoherence of the legislation; if necessary, it was invited to “recommend new machinery appropriate for carrying out that regulation which achieves a more consistent and streamlined approach than is now possible.”34

Alongside this was a growing concern about the impact of the Internet on the industry's commercial value to the British economy. Indeed, this concern was reflected in the first of the Review Body's terms of reference. This was to “consider the current state of the gambling industry and the ways in which it might change over the next ten years in the light of economic pressures, the growth of e-commerce, technological developments and wider leisure industry and international trends.”35 One aspect was the threat to government revenues resulting from the growth of e-commerce during the late 1990s, which took betting not just off-track, but off-shore.36 Just as important as the Review Body's terms of reference was the Department of Customs and Excise's simultaneous announcement of a review of general betting duty (GBD). Its purpose was to replace GBD by a fiscal system that would enable British companies to withstand global competition for the gambling pound and to exploit e-commerce, while also ensuring a return to the revenue.37

The second aspect was remote gambling via the Internet,38 though the concern here was as much to do with player protection as it was with government revenues. Internet sites that offer virtual casino and slot machine gaming pose very real threats, not least from the fact that they are often operated from jurisdictions that are beyond the player's legal or practical reach.39 In short, the player:

has no independent means of verifying the results of the “game,” since its determination takes place entirely within that virtual world

is vulnerable to any number of scams once he has advised the operator of his credit card details

may become dysfunctionally engaged

The three main factors relevant to the Gaming Board's 1999 response were the increasing ease of consumer access to the technology, the commercial disadvantages facing United Kingdom based suppliers,40 and the need for control. Its preferred option was to offer the promoters of these sites the opportunity to subject themselves to the Board's regulation. This would both benefit them (via a “kitemark” of their probity) and allow the imposition of safeguards, such as a bar on credit and limits on losses. This was also thought to protect the government's gambling revenues. But positioning the United Kingdom as “world leader in the field of online gambling” involves commercial judgments beyond the government's control, and as its 2010 consultation shows, is not easily achieved.41

The Review Body published its Report in July 2001 and the government its response in March 2002.42 In the interim, the transfer of responsibility for gambling policy as a whole from the Home Office to DCMS following the 2001 General Election constituted a second significant institutional change within government. Additionally assuming the Department for National Heritage's responsibility for the National Lottery, this reallocation was a clear recognition of the shift that had taken place during the last two decades of the twentieth century. Then a small department with none of the Home Office's historical baggage of coping with the externalities of commercial gambling, it fell to DCMS to implement the Review Body's report.43

The Gambling Review Report's philosophy and proposals

As noted, the Review Body's terms of reference explicitly required it to consider how to strengthen the market in the general interests of the British economy. In this respect, the Review differed fundamentally from any of its predecessors. The Report is itself a model of informed analysis that commenced with two very clear and uncluttered recommendations: to simplify the regulation of gambling, and to extend choice for adult gamblers. The first of these entailed a wholesale review of the existing legislation, the incorporation of all commercial gambling activities (save the National Lottery) into a single Act,44 and the creation of a new regulatory agency to license and monitor the performance of all operators. The second recommendation was to be achieved first by the removal of a number of obstacles to market entry, and secondly, by enabling regulated operators to compete with one another so that consumers would be given greater choice in how and where they gambled. Competition would also help the player by holding down costs and profit margins.45

Given its remit and the nature of Britain's market economy at the close of the twentieth century, it was no surprise that the Gambling Review was clear that competition, and not regulation was both the best vehicle of change and the guarantor of a commercially viable market. Similarly, the second of its starting points simply reflects the broad acceptance of the market philosophy that one function of state intervention is to give consumers greater choice in how they spend their income. Perhaps less obvious was its view that a strong gambling market could also be a vehicle (via resort (regional) casinos) for economic regeneration;46 though the capture of the consumer surplus for a good cause was, as noted, the driving policy behind the National Lottery.

But regulation has a role. In “allowing greater freedom for the individual to gamble in ways, at times and in places than is permitted under current legislation,”47 the Gambling Review Body, like its predecessors, simultaneously embraced while being troubled by the regulatory implications of a libertarian stance. Its Report commented that the most difficult general issue that it had faced concerned “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.”48 And, also like its predecessors, it was concerned about the costs to the individual of what it termed “social excess.” Informed by the results of the 2000 Gambling Prevalence Survey,49 the Review Body was clear that its focus should include “some concern for the effects on society as a whole or on local communities of allowing increased freedom to establish gambling outlets.”50

In terms of regulatory policy, therefore, the Review Body adopted a stance that was in one key respect essentially indistinguishable from that which the Home Office had pursued over the previous 30 years. This was to ensure that “permitted forms of gambling are crime-free, conducted in accordance with regulation and honest, players know what to expect, are confident they will get it and are not exploited, and there is protection for children and vulnerable persons.”51 The function of regulation was to guarantee operators' probity and to guard against inappropriate consumption, both being conditions of a commercially successful market. Indeed, the move to greater freedom was balanced by rather tighter controls on the freedom of young people to gamble and by some tighter controls over those who provide gambling services, notably bookmakers.52

But by 2002, “regulation” meant “better regulation,” meaning transparent, accountable, targeted, proportionate, and consistent regulation of the market, principles to be applied equally to regulatory sanctions.53 To use some other catchphrases of the time, this would be “smart” or “responsive” regulation.54 The legislation would establish the framework of the new regime, defining the parameters of those activities to be brought within its scope and investing the new regulator with its legal powers. The regulator would be given wide powers to impose license conditions and to issue Codes of Practice governing different aspects of the market. On these matters, it would be required to consult operators and other interested persons. Unlike the earlier legislation, the government and the regulator would, by means of subordinate legislation, be able to respond more quickly to market changes. And, not least, the regulator would enjoy the range of administrative sanctions typical of other regulated industries.55

The Gambling Review Report: Implementation

Although it did not accept all of its recommendations, the government entirely accepted the Review's basic stance. Competition would “create a more open and competitive gambling sector” giving “better choice for consumers and enhanced opportunities for business both in the UK and abroad;” “unnecessary barriers to customer access and new entrants to the industry will be removed.”56 For its part, regulation “will be confined to what is necessary to keep crime out, protect the vulnerable, and ensure that gambling products are fair to the consumer.”57 These essentials are contained in the Act's three licensing objectives, which are (section 1):

(a) preventing gambling from being a source of crime or disorder, being associated with crime or disorder, or being used to support crime,

(b) ensuring that gambling is conducted in a fair and open way, and

But the underlying message was translated into the ethos of the Act, which is facilitative rather than restrictive in relation to applications for operating licenses. In exercising its functions under the Act, the Gambling Commission must meet two principal statutory duties. It is required to aim, first, “to pursue, and wherever appropriate, have regard to the licensing objectives.” It is required, secondly, to aim “to permit gambling, in so far as the Commission thinks it reasonably consistent with pursuit of the licensing objectives.”58 This is, it will be clearly seen, is what the lawyers call “a difference in kind,” rather than a “difference in degree,” when compared with the various regulators' duties under the repealed regimes. As the leading practitioner text comments, “the regime established by the 2005 Act is, in contrast to that which preceded it, essentially permissive.”59

The Gambling Review Report's proposals were generally welcomed by the industry and by the parliamentary committee that reported on them,60 but their enactment was not all plain sailing. With the exception of the regional casino,61 and the imposition of a cap on the number of “large” and “small” casinos, the vast majority of the Report's proposals have been implemented. The questions that remain are whether Britain now has a more competitive market with greater consumer choice, governed by more effective and more responsive regulation?

Answers to these questions are not easy to discern, only three years after the Act's full commencement and in the teeth of a recession. On the second, clear and specific examples of “better regulation” are the Commission's industry forums, its e-bulletin, its 2007 telephone hotline (to assist operators' applications), and its impressive risk matrix that allows compliant operators to qualify for light touch inspections.62 Consultation is a central aspect of the various versions and revisions of the License Conditions and Code of Practice, in particular its social responsibility provisions.63 As was the case in the past, some areas continue to present both legal and enforcement challenges; as noted earlier, one of these concerns small non-commercial lotteries. A second concerns what constitutes a “gaming machine” within section 235 of the Act, a matter of law for judicial rather than Commission decision.64 But the Commission's overall sense that it is a provider of advice and guidance to the majority of responsible operators, leaving it free to concentrate on those who threaten to or do compromise the licensing objectives, is a fair conclusion on three full years of operation.65

In 2003, a United Kingdom Casino Review published by William deBroe commented that “impending deregulation should turn the UK casino industry from a niche business to a mainstream leisure activity.”66 By contrast, an analysis prepared by the Henley Centre in 2004 was downbeat in tone. Some consumers might benefit from increased choice, but many would experience a general reduction in local facilities. Operators likewise might have opportunities to develop new products, but others would suffer from increased competition.67 One of the more sobering reality checks was the industry's response to the possibility that the Commission could approve additional 1968 Act certificates of consent until a cut-off point in April 2006. Despite wild media speculation that there would be “a casino in every town” (and the concomitant outrage from the Daily Mail), with figures of 200–250 commonly cited,68 the Commission had received only 79 new applications prior to the cut-off date. From these, 45 certificates were issued; there were at Mar. 31, 2009 145 operating casinos, less than a dozen more than in the Gaming Board's final year.69

Even when these forecasts are reviewed in the light of the changes made during the Bill's parliamentary stages—notably concerning the regional casino and the delayed implementation of the competitions for the large and small casinos—the overall picture is not one of a wholly thriving industry. In its 2008/09 Annual Report, the Gambling Commission estimated the gross gaming yield in 2006/07 (excluding the National Lottery) to be £7.4 billion; in 2009/10, this had fallen to £6.5 billion.70 This is in large measure attributable to the recession, but other factors are at work. The number of licensed betting offices remains fairly constant, while their customers' gambling preferences are shifting to automated roulette machines rather than traditional betting on horse and greyhound races.71 Bingo continues to show a decline in the number of operating venues,72 despite its new freedom to advertise. In sum, things appear not (yet) to have turned out as the Gambling Review Body had envisaged.

Footnotes

1

Report of the Royal Commission on Betting, Lotteries and Gaming 1949–51 (1951, Cmd. 8190).

2

For a definitive account, see David Dixon, From Prohibition to Regulation: Bookmaking, Anti-Gambling and the Law (1991).

3

For a substantial discussion of the social and legal history, see David Miers, Regulating Commercial Gambling, Part One (2004).

4

Royal Commission on Lotteries and Betting 1932–33 (1933, Cmd. 4341). The legislative product was the Betting and Lotteries Act 1934.

5

Royal Commission (1933), 232–36. Hereafter all references to Royal Commissions and other official papers cite only their date of publication following their first full citation, and then simply paragraph numbers.

6

“In the immediate post-war period war gratuities and black market fortunes alike were squandered in a frenzy of gambling that undoubtedly gave economists the impression that here was a source of revenue which only needed tapping to provide a much-needed contribution to the ever-increasing cost of the welfare state.” J. Chenery, The Law and Practice of Bookmaking, Betting, Gaming and Lotteries 18 (1963).

7

Royal Commission (1951), 160.

8

Royal Commission (1951), 159.

9

See the debate between the then Professor of Jurisprudence at Oxford University, H.L.A. Hart, and Lord Devlin, a Lord of Appeal in Ordinary (that is, one of the 12 members of what was then the United Kingdom's equivalent of a supreme court). See, respectively, Law, Liberty and Morality(1963) and The Enforcement of Morals (1965). The debate was prompted by the Report of the Committee on Homosexual Offences and Prostitution (1957, Cmd 247; the Wolfenden Report), which marked a turning point in official attitudes to what John Stuart Mill called “self-regarding” harm.

10

Michael Moran, The British Regulatory State (2003).

11

612 Parl. Deb., H.C. col. 75 (Oct. 27, 1959). In the meantime, the Commission's recommendations on small lotteries were enacted in the Small Lotteries and Gaming Act 1956. In the same year, the Treasury introduced its own lottery analogue, the Premium Savings Bonds. The 1960 Act was consolidated with the lotteries legislation in the Betting, Gaming and Lotteries Act 1963.

12

Royal Commission (1951), 185–6.

13

Royal Commission on Gambling, Final Report (1978, Cmnd 7200), 1.8–1.9.

14

Royal Commission (1951), 408–417.

15

Indeed, this constitutes a core principle of the current legislation, the Gambling Act 2005. Section 7(1) defines a casino as “an arrangement whereby people are given an opportunity to participate in one or more casino games.” Section 7(2) provides that ‘“casino game’ means a game of chance which is not equal chance gaming.”

16

Lord Denning M.R., R v. Commissioner of Police for the Metropolis, ex parte Blackburn, [1968] 2 Q.B. 118, 131.

17

Royal Commission (1978), 18.1.

18

Given the abundant and untraceable supplies of ready money, many clubs were used as outlets for stolen property and for laundering the financial proceeds of crime. There was also widespread criminal exploitation of the gaming machine market.

19

Sanctioning was difficult because the Board itself had no powers of entry or of prosecution. Market sanctions (loss of trading income or of capital value) were often more potent than the direct result of the non-renewal or cancellation of a license before the licensing justices. By contrast, the Gambling Commission has a powerful array of sanctions at its disposal (Gambling Act 2005, §§ 116–121).

20

The symbiotically connected questions concerning the financing of the horseracing industry and the extent of the betting industry's contribution to it remain, in essence, unresolved; see Owen Gibson, Could the Levy run dry? The Observer (London), Oct. 31, 2010, at Sport 14. In the “bonfire of the quangos” on Oct. 14, 2010, the responsible department, the Department for Culture, Media and Sport (hereafter, DCMS) announced that the Levy Board's functions would be modified to remove the Secretary of State's role; <www.culture.gov.uk/news/media_releases/7485.aspx>.

21

See Miers, supra note 4, chapter 7.2.4; and section 14 of the Gambling Act 2005. During 2009 a number of home owners who had been unsuccessful in selling their houses promoted them as “prizes” in a competition. The question was whether these reverse auctions were genuine prize competitions or unlawful lotteries. The Commission has repeatedly advised against such arrangements, and in Dec. 2009 issued updated advice; Gambling Commission, Annual Report 2008/09, 20 (2009, HC 701).

22

Report of the Interdepartmental Working Party on Lotteries (1973, Cmnd. 5506).

23

Royal Commission (1978), 12.134.

24

See generally, Moran, supra note 11, at ch. 4 and 5; Regulation and Deregulation ch. 1, 9, and 17 (Christopher McCrudden ed., 1999); and Cosmo Graham, Regulating Public Utilities (2000).

25

By way of illustration, some 10 years earlier, the only gambling product available in licensed betting shops was betting. By the mid 1990s, it was possible to engage in gaming by means of machine, play a fixed odds numbers game that strongly resembled a lottery in its format, and engage in football pools transactions. By comparison with the original Spartan regime, the player could now also buy a soft drink and a sandwich, and wave at his friends looking in through the clear front window from the street outside (if, as is customary, it was not primarily covered in advertising material).

26

In July 2010, David Cameron MP, Prime Minister of the coalition government that emerged from the inconclusive May 2010 general election, launched the notion of “big society communities” (such as charities and local voluntary groups) to be funded from dormant bank accounts for the purpose of creating opportunities for social action and community involvement,such as keeping museums open or running a community public house. <http://www.cabinetoffice.gov.uk/newsroom_newsreleases/2010/100719-bigsociety.aspx>. These aspirations are similar to those underpinning the “Big Lottery,” one of the distributors of the proceeds of the National Lottery, which grants money to community groups and projects that improve health, education and the environment. <http://www.biglotteryfund.org.uk>.

27

Apart, perhaps, from the economic health of the bookmaking industry so far as it contributed to the support of horseracing; see Home Affairs Committee, Levy on Horserace Betting 1990–91 (1991, HC 146-I), The Tote (1991, HC 451). In addition to the changes announced in Oct. 2010 concerning the Levy Board (supra note 21), DCMS proposes finally to divest itself of the second troublesome arrangement for the funding of horseracing, the Tote, which is to be transferred to the private sector. See 515 Parl. Deb., H.C. col 39WS (Sept. 15, 2010).

28

Home Office research did confirm a direct statistical relationship between the Lottery and off-course betting expenditure, though such other factors as a mild winter or the expense incurred in additional opening hours may also have contributed. S. Field and J. Dunmore, The Impact of the National Lottery on the Horse-race Betting Levy: Second Report 4 (1997).

29

Report of the Gaming Board for Great Britain 1994–95 (1995, HC 587), 1.20. There was also “a danger of a ‘ratchet’ effect developing, with different sectors vying for ways in which they can seek to match or better any concessions made to others.”

30

With its monopoly franchise, the competition for the single operator ran wholly counter to almost every other aspect of the then Conservative government's approach to the provision of public and semi-public goods. For a more recent review, see David Miers, Latest Developments in the United Kingdom's National Lottery, 11 Gaming L. Rev. 542–551 (2006).

31

For example, in casinos, the reduction to 24 hours of the 48 hour rule and the introduction of debit cards to purchase tokens for play; in betting shops, an increase in the number and prize limits of permissible gaming machines.

32

GamCare conference, Oct. 17, 2001. This echoed the analysis presented in Jerome Skolnick's classic study of the casino market in Nevada, which in the mid-twentieth century was transformed into a regulated business free from its criminal history. J. Skolnick, House of Cards: The Legalization and Control of Casino Gambling (1978).

33

Committee on Delegated Powers and Deregulation, The Proposal for the Draft Deregulation (Casinos) Order 1999, 22 (1999, HL 76); Gaming Board; Report of the Gaming Board for Great Britain 1998–99 (1999, HC 525), 1.12–1.27.

34

Gambling Review Report (2001, Cm 5206; Chairman, Sir Alan Budd), 2.1.

35

Id.

36

See the report of the Public Accounts Committee, HM Customs and Excise: Revenue from Gambling Duties 1999–2000, 4 (2000, HC 423). Off-shore bookmakers are not included in the Levy scheme, which is a contributory factor in the shortfall in its income to the racing industry.

37

Customs and Excise Consultation Document Budget 2000, Our Stake in the Future: Modernisation of General Betting Duty for the 21^st Century (April 2000). GBD (then at 6.75% on each bet) was replaced by a tax on gross profit (viz., stakes less winnings).

38

Report of the Gaming Board for Great Britain 1990–2000, Appx. VIII (2000, HC 616).

39

There are additional concerns relating to children's access, and to their use for money laundering. P. Hugel and J. Kelly, Internet gambling, credit cards and money laundering, 6 J. Money Laundering Control 57–65 (2002).

40

Gaming Board, Gaming Board Study on Internet Gambling (1999). It was undesirable that “respectable British companies are prevented from setting up Internet gaming sites in Britain, while British Internet users have lawful access to overseas sites which might be wholly unregulated.” The issue was (and remains) considerably complicated by the ambivalent responses within the European Union's institutions' responses to the restrictive measures adopted in some member states. See David Miers, A British view of European gambling regulation, in European and National Perspectives of the Regulation of Gambling 81–126 (A. Littler and C. Finualt eds., 2006).

41

DCMS, The Future Regulation of Remote Gambling: A DCMS Position Paper 133 (April 2003), and Consultation on the Regulatory Future of Remote Gambling in Great Britain (2010).

42

Supra note 35; DCMS, A Safe Bet for Success: Modernising Britain's Gambling Law(2002, Cm 5397).

43

Its terms of reference precluded the Review Body from considering changes to the National Lottery. But it was required to look at the impact on the Lottery of any proposed changes, including an assessment of the potential effect on the income to good causes.

44

The government has since announced that in the interests of public expenditure it proposes to merge the National Lottery with the Gambling Commission; supra note 21. This will require primary legislation as well as the reconciliation of the two regimes' differing statutory objectives. The Gambling Commission exists to facilitate gambling where it complies with certain fundamental principles (the licensing objectives; infra). The National Lottery Commission exists, subject to duties of propriety in its management, to maximize the proceeds of the Lottery.

45

Gambling Review Report (2001), 1.1, 1.17, 3.3.1–3.3.2, 16.9.

46

Gambling Review Report (2001), 1.7, 24.29–24.37.

47

Gambling Review Report (2001), 3.2.

48

Gambling Review Report (2001), 3.1.

49

K. Sproston, B. Evans, and J. Orford, Gambling Behaviour in Britain (2000); Gambling Review Report ch. 17 (2001).

50

Gambling Review Report (2001), 3.22–3.27.

51

Gambling Review Report (2001), 1.2.

52

By comparison with casino and bingo operators, bookmakers are “very lightly regulated,” Gambling Review Report (2001), 19.34.

53

Alternatives to State Regulation (2000, Cabinet Office); P. Hampton, Reducing Administrative Burdens: Effective Inspection and Enforcement (HM Treasury, Mar. 2005); R. Macrory, Regulatory Justice: Making Sanctions Effective (Nov. 2006, Cabinet Office).

54

Neil Gunningham and Peter Grabosky, Smart Regulation: Designing Environmental Policy (1998), Ian Ayres and John Braithwaite, Responsive Regulation (1992).

55

On the Gambling Commission's regulatory structure, see David Miers, Implementing the Gambling Act 2005: The Gambling Commission, and the Casino Question, 10 Gaming L. Rev. 472–481, 472–478 (2006).

56

DCMS, Draft Gambling Bill: Regulatory Impact Assessment (2003), 1.78.

57

DCMS (2002), 10.9–10.10.

58

Section 22(b). By section 153 local authorities are under the same duty when considering applications for premises licenses.

59

Stephen Monkcom and Contributors, Smith and Monkcom: the Law of Gambling (3d ed., 2009), par. 3.11.

60

Culture, Media and Sport Committee, The Government's Proposals for Gambling: Nothing to Lose? (2002, HC 827); and Government Response (2002, Cm 5622).

61

The implementation in the draft Gambling Bill of the Report's proposals to permit the establishment of “resort” casinos became mired in a protracted and acrimonious argument about their potential for the social and economic regeneration of depressed areas of the country. In the end, Gordon Brown MP, then Prime Minister, vetoed the idea. For an account of the whole sorry tale, see David Miers, Implementing the Gambling Act 2005: The Gambling Commission, and the Casino Question, 10 Gaming L. Rev. 472–481, 478–80 (2006), and Another U-Turn: Great Britain's Casino Questions and Other Gambling Issues, 11 Gaming L. Rev. 699–713 (2007). The parliamentary and political heat that this issue generated did little to assist analysis of other important areas of the Draft Bill.

62

See the Gambling Commission Web site, <http://www.gamblingcommission.gov.uk>.

63

David Miers, Gambling in Great Britain: Implementing a Social Responsibility Agenda, 12 Gaming L. Rev. 585–600 (2008). The Code of Practice was revised and reissued in Oct. 2008.

64

R (on the application of the Gambling Commission) v. Bird, [2010] EWHC 995 (Admin).

65

Gambling Commission, Annual Report and Accounts 2009/10 (2010, HC 199), 4.

66

UK Casino Review: Deregulation; Nipped in the Budd? (2003) i.

67

Economic and Social Impact Study of the Proposed Draft Gambling Bill (2004), Executive summary 7.

68

For example, Sam Coates and David Charter, Britain catches gambling fever with a casino in every town, The Times (London), Oct. 14, 2004.

69

Gambling Commission, Annual Report and Accounts 2005/06 (2006, HC 1226), and 2009/10 (2010, HC 199), and the Commission's Industry Statistics 2008/09. If all the applications currently undecided were approved, there would be a theoretical maximum of 192 1968 Act casinos.

70

Gambling Commission, Annual Report and Accounts 2008/09 (2009, HC 701), 9, and 2009/10 (2010, HC 199), 8.

71

The roulette machines were known as “fixed odds betting terminals” (FOBTs); under the 1968 Act, they occupied disputed legal territory (were they gaming or betting machines?). Under the 2005 Act, they are gaming machines (category B2). In 2008/09, there were 8,862 LBOs, compared with 8,800 in 2007/08; see Gambling Commission, Industry Statistics 2007/08 and 2008/09. Nearly 6,000 are owned by “the Big Three”: Ladbrokes, William Hill, and Coral. <http://www.gambling commission.gov.uk>.

72

At Mar. 31, 2008, there were 222 bingo operators operating 675 clubs; a year later, the figures were 216 and 641 respectively; Gambling Commission, Industry Statistics 2008/09, 6. In Aug. 2010, the Commission announced that it would change the publication date for its annual statistics document so that its date would be based on its fiscal year reporting (Apr. 1 to Mar. 31).