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Categories of Gaming Machine (Amendment) Regulations 2009

My Lords, with permission, I beg to move the Motion on the Order Paper. We are debating this evening the draft Categories of Gaming Machine (Amendment) Regulations 2009. These regulations are intended to increase the stake and prize limits for all category C gaming machines, and for only specified types of category D machines. Last year the Government received numerous representations in support of seaside arcades, which were struggling under difficult trading conditions. As noble Lords will be aware, the economic climate has not improved and many businesses continue to struggle. For example, arcade revenue is down by 21 per cent, with over 170 reported closures since July 2007, resulting in nearly 1,000 jobs lost. Manufacturing output of gaming machines is down 55 per cent since 2005, with nearly 300 jobs lost since 2007. Seaside arcades offer soft gambling environments. They are not permitted to offer higher prize gaming machines, and they form an integral part of many families’ holidays. It is for these reasons the Government wish to see them prosper and continue. That is why, on 25 June 2008, the Government announced that to examine the case for providing economic assistance to seaside arcades, as well as pubs and clubs, they would bring forward a review of stake and prize limits in respect of low-prize category C and D machines. Following an initial consultation exercise, the Government were persuaded that a modest increase in stake and prize levels was appropriate. They remain confident that such an increase will not risk the licensing objectives in the Gambling Act, which are rightly cast in terms of protecting children and vulnerable adults from being harmed or exploited by gambling. I turn first to category C gaming machines. The maximum stake for a category C machine is currently set at 50 pence, with the maximum prize set at £35. These regulations will increase the stake limit to £1 and the prize limit to £70. Noble Lords will know that the Government consulted publicly on a number of options last August, with the preferred option being to increase the stake limit to 60 pence and the prize limit to £60, compared to the proposal of £1 and £70. It was felt at the time that a 100 per cent increase in stake and prize levels might be difficult to reconcile with the precautionary approach already taken to the implementation of the Gambling Act 2005 as a whole. The Government were concerned that prize levels of £70 or more might take category C gaming machines in the direction of harder gaming machines, unless accompanied by additional restrictions on game speed and features. They did not want to see the important distinctions between harder and softer gaming machines eroded. However, responses to the consultation made it clear that 60 pence and £60 limits would not have the necessary benefit for the operators of seaside arcades or machine manufacturers in the way that was hoped or judged to be needed. It was unlikely, in particular, that such limits would generate adequate new business for machine manufacturers and suppliers. Market research showed that moving away from the present stake-to-prize ratio of 1:70 would deter players. That meant that as well as being unattractive to players, the limits would be too low to provide incentives for manufacturers to develop new machines and for operators to replace legacy machines. Therefore, after discussions with a number of trade associations, the Government accepted that limits of £1 and £70 for category C machines would be more practical and economically beneficial to operators and manufacturers. The availability of higher prize category C machines is more likely to encourage operators to replace their legacy machines with new machines. This will help to invigorate the manufacturing market, which I described earlier as having a challenging time. It will also enable manufacturers to provide a range of appealing games as an alternative to the higher prize, harder gambling, category B machines. By not alienating players who might be interested in multi-stake and multi-prize machines, a £1 stake to £70 prize limit offers a real incentive to operators of soft gambling environments, such as seaside arcades, to refrain from splitting existing premises to gain a higher proportion of category B machines. The Government also took into account advice from the Gambling Commission that, in the wider context of problem gambling, changes of up to £1 in stake would not pose a significant threat to the licensing objectives, provided appropriate controls on machine standards were put in place. The Gambling Commission is doing just that and the Government are confident that these revised standards will help to allay any concerns raised during the consultations. I turn now to category D machines. These regulations do not affect money prize machines—that is, the lowest prize category of fruit machines. Instead, they are intended to increase the stake and prize limits for so-called crane-grabs and coin-pusher machines, also known in the trade as penny falls. These types of machine are a much present element of seaside arcades, and playing them also forms an enjoyable part of many families’ weekend and holiday activities. At present, coin-pusher machines have a maximum stake limit of 10p and a maximum total prize of £8, of which £5 can be cash and up to the value of £3 can be non-cash. This has enabled operators of such games to include small non-cash prizes to vary the offer and the attractiveness of these machines. During the first public consultation there were no representations in relation to coin-pusher machines that warranted any change to the Government’s original view. They remain satisfied that any increase will not jeopardise the licensing objectives. Therefore, under these regulations the maximum stake for coin-pusher machines will remain at 10p, while the maximum prize will increase to £15, of which £8 can be a money prize. For crane-grab machines, the maximum stake is currently set at 30p, with the maximum prize value set at £8. These regulations will increase the stake limit to £1 and the prize limit to £50. Back in August the Government originally consulted on a revised limit of 50p and £30 for this type of machine. The primary reason for this was caution, given the appeal of these machines to children. However, following the consultation, it became clear that these proposals, while not endangering the licensing objectives, would not provide the benefit to seaside arcades that had been hoped. After discussions with a number of trade associations, the Government accepted that stake and prize limits higher than those initially proposed would enable operators to offer more attractive prize items such as PlayStation and Xbox games, mobile phones and iPod Shuffles. As a parent, I know that we must, however reluctantly at times, accept that tastes for prizes have grown more sophisticated over the past decade or so. By allowing seaside arcades to offer such prizes, these regulations will go a long way to help them to address the difficult economic position in which they find themselves and to keep themselves commercially attractive. That is why it was felt that on balance that £1 and £50 limits would be more appropriate. The Government are reassured that this increase, when considered within the overall context of the regulatory regime, will not undermine the licensing objectives. Also, raising the limit of crane grabs to £1 will not be a price increase in the conventional sense. Rather, operators will continue to offer a range of stakes and prizes, from a 10p stake and a £1 prize upwards, with the average stake likely to be 33p or less. This will give operators the opportunity to offer the choice that their customers wish. I know that some here this evening will have concerns about the stake and prize limits for category C and category D gaming machines being increased at all and, indeed, to these levels. I would like to comment on those concerns as they have featured largely in our decision-making. It is appropriate to reiterate that protection of children and the vulnerable from the potential harm of problem gambling remains central to the Government’s approach to gambling and gambling regulation. That is why the decision was made to consult again on the revised proposals in December last year and to conduct that consultation clearly and over time to a degree for which we have been criticised for not concluding in advance of the Easter season. The Government felt it important that all stakeholders who might be concerned about the risks to problem gambling should have another opportunity to voice their opinions. In particular, representatives from the faith groups were invited to a meeting during the consultation period so that their concerns could be heard and understood at first-hand. The Government took those views into account when deciding on the current proposals. Increasing the stake and prize limits for low-prize gaming machines does not represent a relaxation of the regulatory regime, nor should these proposals be viewed in isolation. Instead, they must be considered within the context of the regulatory regime put in place by the Gambling Act 2005. All categories of gaming machines must comply with strict regulations and equally strict technical standards. To ensure that the distinction between category C and higher category B gaming machines does not become blurred, the Gambling Commission is proposing to amend the technical standards in respect of speed of play and linked games for category C gaming machines. Revised standards to this effect were notified to the European Commission on 10 March. Indeed, the Government sought the advice of the Gambling Commission early on in this process. It is its view that, in the wider context of problem gambling, changes in stake limits of up to £1 will not pose a significant threat to the licensing objectives provided that appropriate controls are put in place. Also, through operating licences the Gambling Commission licenses and regulates all those who manufacture, supply, install, maintain, adapt or repair gaming machines. In addition, further protections for consumers are secured through the Gambling Commission’s licence conditions and code of practice, which include specific provision in relation to underage gambling and problem gambling through requirements in respect of supervision, access, staff training and self-exclusion. Noble Lords will know that some stakeholders, including faith groups, have been critical of these proposals. They are concerned that the Government appear to be endorsing ever higher levels of gambling when economic conditions mean people might have less money to spend. That is not the case. The Government have listened to the case made by the gambling industry but they have also taken on board the concerns that have been raised in all the consultations carried out in relation to these regulations. Stakes and prizes form only a small part of the overall regulatory and protection regime created by the Gambling Act and these proposals, when considered within their overall context, do not jeopardise the licensing objectives. To ensure that this remains the case, the Government will, of course, monitor the implementation of these regulations. It is important to reiterate that, for the majority of people, gambling in this form is an entertaining and entertainment pastime that presents not problems but rather enjoyment and reward. These regulations are designed to ensure that operators at the softer end of the gambling industry, particularly seaside arcades but also pubs and clubs, are able to manage in difficult trading conditions and increasingly competitive markets, but only in so far as the licensing objectives are preserved. It should be made clear that continually increasing stake and prize levels is not the only answer to the pressures faced by operators and manufacturers. The industry must explore—and, indeed, is exploring—other ways to freshen its appeal. That said, the Government are in a position to provide some limited help. They recognise that there is a need to protect jobs and to support a challenged industry in unprecedentedly difficult times. However, there is also an obligation on them to ensure that vulnerable people, particularly children, are protected from the potential harm that excessive gambling can cause. The licensing objectives are therefore non-negotiable. Stake and prize levels for category C and certain types of category D machines are being increased to assist the industry, but only because the Government are satisfied that the licensing objectives will not be prejudiced by so doing. Noble Lords can be assured that the Government have not been cavalier with the concerns raised by faith groups and other stakeholders during this process. They have been listened to and their concerns have been considered and taken into account. Overall, the Government are satisfied that the proposed changes will give the industry the lift it genuinely needs without undermining the precautionary principle adopted throughout the implementation of the 2005 Act. It is for these reasons that I commend these regulations to the House.