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Strength in Versatility

By Tracy Damestani, CEO, NCF

On 23rd May last year senior members of NCF made a series of presentations on the future of the casino industry, and the regulatory regime which governs it, to a group of Parliamentarians. The event was an opportunity to set out our stall and articulate the case for change. The ideas discussed were well received, underpinned as they were by strong social responsibility credentials. But whilst we expected those in the room to be broadly sympathetic we were also aware that any tinkering with gambling policy would be a tough political decision and the path to change would likely be slow, painstaking and bumpy. But we were prepared for the long-haul; operating within a political landscape where we could look far into the horizon with, we thought, a degree of clarity.

Exactly one month to the day later, Britain voted to leave the EU – a decision few had predicted and one which would render all the old certainties of recent political calculations moribund. Within days David Cameron’s premiership had ended and, in the process of choosing a new Prime Minister, so too had the careers (for now at least) of several other high profile Government Ministers.

23rd June 2016 heralded a generational shift in the Tectonic plates of politics and for a while it seemed that, so far as gambling policy was concerned, all bets were off. But that was without reckoning on the fortitude of the gambling Minister, Tracey Crouch, MP, who just before Christmas published the Call for Evidence around gaming machines and Social Responsibility. Her views on various aspects of gaming are well known and well documented and we have to hold together as an industry if we want to address some of the anomalies of the 2005 Gambling Act – anomalies that even the Ministers who took it through Parliament recognise need revisiting. For casinos, sitting as they do at the top of the regulatory pyramid, this call for evidence represents a chance to inject consistency and transparency into the way they operate and to provide our customers (whether domestic or from overseas) with the sort of gaming experience they want and that they can access around the world.

NCF, on behalf of all land based casino operators in the UK, took this opportunity to reiterate the modest changes we would like to see. Despite being a trade body with diverse and varied brands within membership it was easy to coalesce around a few important, but straightforward, recommendations.

At its heart our response proposed changes to the machine regime that will allow the casino sector to respond to customer demand, boost tourism, match global competition and keep up with technological advances whilst remaining at the vanguard of socially responsible gambling. Our proposals would boost jobs in the sector, contribute to economic growth and lead to increased revenues for HM Treasury.

We recognised that the 2005 Gambling Act made many welcome improvements to our broader sector but the legislation also had unintended consequences for the UK casino industry. Indeed, it has limited the development of new and innovative gaming products found elsewhere around the globe and fell short of many of the reforms needed to allow casinos to grow and compete in a rapidly evolving marketplace. This, despite the fact that London continues to host the ICE Totally Gaming exhibition, the annual launch pad for gaming innovation many of which sadly fall foul of our current legislation.

Specifically, we are predominantly concerned about the disparity between the number of gaming machines permitted and licensed under the 1968 Gaming Act “converted casinos” and the 16 licensed under the 2005 Act “2005 Act casinos”.

By way of context, only six of the 2005 Act casinos have actually opened in the nine years since the Act became law in 2007. A primary reason for this being the commercially impractical ratios of machines to tables anticipated in the Act, as well as the designated locations of the new licences being geographically and economically inappropriate.

By creating a three tiered licensing regime (or four if the currently redundant Regional casino licence is included), based in large part on the allocation of machines, the Act introduced confusion into the casino landscape which benefits neither consumers nor operators and which does not advance our collective social responsibility objectives.

In summary, we have suggested that consideration be given to the following key asks:

• Allow Small 05 Act casinos to move from a 2:1 machine to table ratio to a 3:1 ratio capped at 80 machines.

• Allow converted casinos the same ratio of 3:1 for machines with a minimum, grandfathered, allowance of 20 machines regardless of the number of tables, capped at 80 machines.

• Increase the machine numbers cap for Large 2005 Act casinos in accordance with the existing 5:1 machine to table ratio up to 500 from 150.

After careful consideration and consultation, we decided not to ask for a further increase to the basic stake and prize for B1 machines in this review, believing that the more pressing matter is to address the anomaly of machine numbers between 2005 Act and converted casino licences. However, as noted below, we did recognise the particular circumstances that apply to the high end of the market.

Social responsibility

Ministers, and others, rightly demand that the industry demonstrates rigorous social responsibility credentials. NCF has always been committed to promoting responsible gambling, the most recent example of which is an enhanced responsible gambling programme, Playing Safe, which formally launched in 2013, to which all members are signed up. Playing Safe’s principles (a code of best practice) define the way the UK casino industry conducts its business and is the flagship industry-led responsible gambling programme in the UK. The Playing Safe Accreditation, Certification and Evaluation Panel (ACE) has developed a methodology for evaluating company practices against this code, and evaluations have been conducted on the four largest casino companies, all of which were judged to have been compliant with the code. The evaluations have revealed some examples of best practice which are in the process of being shared across the sector as well as some more challenging issues which are shaping the next strands of Playing Safe’s work.

In addition, in August 2015 NCF also launched a national self-exclusion scheme called SENSE™ (Self- Enrolment National Self-Exclusion), an industry first.

Whatever the outcome of the current call for evidence, tangible, effective social responsibility protocols will continue to be central to our approach to customer care and good practice.

High End Casino Stake and Prize Limits

The land based casino sector predominantly offers a mainstream retail approach. Generally, high visitor volume with a lower spend per head is common across most of the sector. This is in contrast to the high-end Mayfair casinos which have a low visitor volume but much higher spend per head. The high-end Mayfair casinos are relatively few in number (about ten) and offer few, or even no, machines at all on their premises. This is predominantly due to the lack of interest shown by their “high roller” international clientele in wagering stakes of no greater than £5 with a prize no larger than £10k. These international customers are used to significantly higher stakes and prizes on machines in other jurisdictions. This limited number of high-end casinos, their customers and HM Treasury would all benefit if the stake and prize on a version of B1 machine was higher, in keeping with machines in competing jurisdictions, at £50 maximum stake and £100k maximum prize.

We therefore requested that the issue of higher stake and prize machines for high-end casinos be considered as part of the current Call for Evidence or, if it was outside the scope, as part of on-going consideration of casino policy.

Economic case for modernisation

In our evidence, the NCF demonstrated the economic benefits that would accrue if the Government takes this opportunity to allow the industry to evolve in a logical and organic manner. Specifically we cited the findings of a NCF commissioned EY report ‘Stimulating Growth in the UK Casino Industry’ which included:

• An additional £100 million of Gross Value Added (GVA) to the UK economy, rising to £150 million when indirect factors are included.

• Harmonisation would also increase jobs; the EY report identifies that an extra 1,000 jobs could be created. Notably, more than 75% of these jobs will be created outside of London.

• These changes would boost revenues for casinos by an extra £175 million.

• GVA growth as a result of these changes will not

just be centred on London. The North of England will see a £35 million increase in GVA whilst the Midlands and Wales would see a £25 million boost.

• Once indirect and induced factors are included the proposed changes will result in extra £65 million tax revenue for HM Treasury.

• A key area identified by the report is that changes will require capital expenditure to accommodate extra machines: EY estimates that this investment could be worth £115 million to the UK economy.

And as we pointed out, NCF expects that as a result of the changes we are proposing, casino operators will seek to upgrade their existing estate leading to greater investment.

What next?

‘Politics’ so the saying goes, ‘is the art of the possible.’ The fact that the Government has called for evidence is no guarantee that changes to the regulatory regime for casinos will be forthcoming. And of course there is really only one game in town at the moment, and that’s Brexit – an issue our political masters will be grappling with for some considerable time to come. But while Tracey Crouch remains in post it does seem likely that our issues will not be allowed to drop completely off the radar.

We know there are many agendas in play as the Department, and Government more broadly, grapples with the various competing demands of pressure groups and industry bodies.

For NCF the current call for evidence represents an opportunity to reiterate the case for modernisation within our industry. We do so knowing we sit at the top of the regulatory pyramid and within a social responsibility framework that, whilst always seeking to improve, is robust and effective. It is a case we are proud to make.