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Thursday, 14 April 2016

The Budd (breakfast) Report

This week, Olswang and Regulus Partners co-hosted Sir Alan Budd, one of Britain’s foremost economists and the man who chaired the 2001 Gambling Review Body (whose report gave rise to the Gambling Act 2005). Sir Alan recounted his experiences from that time, explaining the processes, pitfalls and issues arising from the eventual legislation – and in so doing offering valuable lessons for any future review.

Here is our summary of his hugely informative and insightful perspective.

Sir Alan Budd started by making the often overlooked point that government policy was at that time often generated by committees of people “of a certain class” without much experience, knowledge or even interest in the subject of their considerations. Luckily for gambling, Budd took a keen interest in the subject and could bring an economist's training to bear. The appointment of the Gambling Review Body was precipitated by three forces; a sense that gambling legislation was “in a muddle” (with different acts for different parts of the industry); there was an untested perception of greater permissiveness since the key legislation of the 1960s; and the nascent but clearly emerging issue of online gambling needed to be dealt with.

It was Budd's view, which guided thinking, that good gambling legislation should be about both enabling and protecting the consumer – and he referred to the need to find a balance between the two as his ‘central dilemma’.

The Gambling Review Body was not interested in the profitability of gambling companies, high employment or in moral judgements on the simple desirability of gambling. Yet while the committee received around 200 operator submissions, undertook numerous meetings with industry and conducted site visits, they received little in the way of direct testimony from ‘the consumer’. Thus they considered the behaviour of ‘Punters’ through the prisms of observed experience and research (mainly the British Gambling Prevalence Survey, the Family Expenditure Survey and their own ONS participation survey). Critically, however, the principle that (proportionate) harm reduction trumped the freedom of the majority was enshrined from the start. While the committee included taxation within its terms of reference, it was not mandated (nor indeed equipped) to opine on fiscal policy.

Budd recommended that the legislation should be flexible and enforcement simplified.  The regulator (we owe to Budd the creation of the Gambling Commission) would ensure that principles were followed, the sector behaved responsibly and technological changes were adapted to. This was largely followed, though with the significant caveat of machines stakes and prizes, which was reserved by DCMS. Other advice not taken or fudged was to ensure that remote operators were licensed in the UK (now fixed), that the NHS should be mandated to address problem gambling and that ambient gambling should be removed (first clubs were protected, now the Greene King case is challenging the licensing principle of ‘primary purpose’). 

The immediate success of the ‘Budd Report’ was that the vast majority of its recommendations were enshrined within the Gambling Act. The longer-term effects are more difficult to ascertain but gambling legislation in 2016 is undoubtedly simpler and more flexible as a result of the ‘Budd Report’; choice has been extended significantly for adult gamblers; strong controls are in place to restrict crime; problem gambling rates have remained relatively stable; and remote gambling has flourished without giving rise to the scale of public health issues feared at the time. 

No discussion of this episode would have been complete without reference to the political controversy that swirled around Budd’s proposals for resort casinos. The dilution and final extinction of plans for destination gambling was, it seemed, an example of how moral judgement (often disguised as paternalism) can trump considered analysis. Sir Alan noted Professor Peter Collins’s assertion in ‘The Great British Casino Shambles’ that this represented “typically British political decision-making”. 

In the round-table discussion which followed Sir Alan’s opening remarks, it was recognised that the Gambling Commission today has considerable flexibility under the framework provided by the Gambling Act, but that this framework is much tighter on the supply and shape of land-based gambling than it is on the remote sector. It was acknowledged that there has been a recent shift in industry perceptions on and engagement with ‘Responsible Gambling’; and that in time this may pave the way for less defensive modes of engagement on legislation and regulation. Happily, the vexed subject of FOBTs only made a brief appearance, with the standard arguments being rehearsed; though there was some recognition that perhaps the Gambling Act had 'unintended consequences' of proliferating high stakes gaming and putting casinos at a relative disadvantage. Given the increasing evidence (supporting both sides) and increasing harm mitigation initiatives, it was suggested that a Triennial Review would be helpful to tackle these issues. 

More broadly, a view emerged that under the Gambling Act, remote gambling was less heavily regulated and faced fewer constraints than its land-based counter-parts (a bias largely reinforced in the tax code) - despite Budd having recommended casino-style regulation for ‘online gambling’. Moreover, it was suggested that some of the current regulatory friction was being generated by land-based operators rubbing up against the confines of restrictive (possibly anachronistic) licensing regimes.

While the idea of a new gambling review was met with caution, the discussion posed an important regulatory question - whether the Government is happy to preside over a legislative regime that encourages and accelerates channel shift from land-based to remote gambling. There are clear benefits to this shift, notably the greater levels of data and technology-driven harm prevention measures that can be deployed; but there are likely to be problems too.

Perhaps most significantly, our breakfast briefing with Sir Alan Budd served as a reminder of a period when benefits to the consumer (both in terms of their enjoyment and risk of harm) were placed explicitly at the heart of government thinking and policy on gambling.  

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