Fit for purpose? The industry reacts to the National Audit Office report into the UK Gambling Commission

The government’s National Audit Office report into the Gambling Commission (UKGC) claimed the organisation was falling behind in its remit to regulate the industry in the UK.

The report cited deficiencies in funding within its current licence fee structure, as well as shortcomings in the way the UKGC implements code of conduct changes.

In the wake of the findings, APPG chair Carolyn Harris claimed the UKGC was not fit for purpose and had been “outpaced and outgunned” by operators at every turn, particularly in the online space. She even called for the resignation of UKGC CEO Neil McArthur, despite the report concluding the regulator was undeniably stretched beyond its resources.

Below, the UKGC and Betting and Gaming Council (BGC) have their say, along with Keystone Law’s Richard Williams, Alexem head of gaming Peter Murray and Northridge LLP partner Melanie Ellis.

DCMS is responsible for gambling policy and legislation. The Gambling Commission regulates the industry. The two of them need to work together to ensure #gamblingregulation can keep pace and protect gamblers. Read our report: https://t.co/vz4x6tItaY #gambling #addiction

— National Audit Office (@NAOorguk) February 28, 2020

The UK Gambling Commission

Our data shows that consumer confidence is low and to improve this we must see a drastic reduction in the number of people experiencing harm. This is why we had to implement a much tougher enforcement strategy in 2017. Since then we have issued record penalties and fines as well as giving warnings, imposing licence conditions, and suspending and revoking licences.

We want to support and collaborate with the industry in raising standards to protect consumers faster. This is why we are working with them on key areas such as inducements to gamble, advertising technology, game design and developing a single customer view to improve consumer protection.

The review also identifies several other options that we are keen to explore further. For example, we have been looking closely at consumer behaviour and how this information can inform efforts to raise standards. We will look across the regulatory sector to better understand the potential for financial incentives and whether there is scope to work around the constraints of the existing framework.

Michael Dugher, CEO, Betting and Gaming Council

We welcome the National Audit Office report, it highlights several important areas where improvements can be made including educating consumers, advertising, loot boxes and dispute resolution. We are determined to raise standards in betting and gaming through our safer gambling commitments and agree with the NAO that good regulation involves intervening in a timely, proportionate and effective way.

The recommendation that the Gambling Commission use incentives to encourage operators to go beyond the minimum is an interesting proposal and one that we are willing to explore. The report highlights an increase in gross gambling yield by 57% between 2008 to 2019, however it emphasises that the majority of this is down to how the figures were recorded as online gambling was not fully included until 2014.

Richard Williams, partner, Keystone Law

I think it’s totally unfair for Carolyn Harris MP and Chair of the APPG to be calling for Neil McArthur CEO of the Gambling Commission to resign.  The Gambling Commission oversees a £11.3bn GGY industry, with funding of just £19m.  I was astounded when I read how little financial resources the Commission has.  It was inevitable that, given the growth of the online sector, the Commission, constrained by the amount of income it can bring in, would not be able to keep up with demand.  But that means where it is failing that is due to underfunding, rather than being “not fit for purpose”.  In my view, the Commission should be applauded for the compliance work it undertakes on such a small budget.  Ask any operator and they will tell you how much regulation has ramped up since Neil McArthur became CEO.

I can see where this is heading.  It’s likely that operators will be told they must pay higher licensing fees to fund the Gambling Commission so it can cope.  However, I believe this should be resisted.  The gambling industry generates £3bn of duty.  Remote gaming duty was increased by 6% to 21% on 1^st April 2019.  Where is all that duty going?  Some of it should be ringfenced to protect consumers and to properly fund the regulator to enable it to effectively regulate this “huge and fast evolving industry”.

Peter Murray, head of gaming, Alexem Services

The findings of the NAO report are of no great surprise to anybody following the sector over the last decade. ‘Regulator struggles to keep up sector changes’ is something most technology-led sectors can identify with. In this instance many of the issues highlighted in the report are not of the UKGC’s making. Funding and recruitment issues are always going to be a challenge for a regulator which simply can’t compete with the resources or attraction of a technology employer. The government should be doing more and between them they will have to be more creative in how they encourage those with the right skills, but never underestimate the attraction of bean bags, creches, flexible working and free fruit (and imagine the outcry if they started offering that!)

Money is not the only answer as a regulator will never have enough financial resource to compete for the same skills but it doesn’t mean they can’t be better funded and can’t keep pace with the changes they are regulating. Gaining a better understanding of how operators runs their business and a customer consumes the product is not beyond them.

I think for the UK the question is, is the Gambling Commission as it stands the one to lead the change in regulation? For this I would look at the last two years under Neil McArthur for evidence that they can be entrusted with this. There is no doubt the UKGC has made significant steps to address some of the key issues. The focus on problem gambling, evidence and outcome-based legislation and facilitating industry wide collaboration may be overdue but it is exactly where we should be heading.

For some this is too little too late, or it will never be enough but they are undoubtedly steps in the right direction but they will take time to play through. Is time something the UKGC has? The Gambling Act is going through the process of review but for anyone with views on the sector, whatever side of the argument you fall on, this needs to be conducted in an environment of calmness and based upon evidence-based measures and at the moment I am not seeing much of that!

This will only work with a collaborative approach and those such as Carolyn Harris simply shouting that the UKGC is not fit for purpose is way too simplistic for an industry moving this fast.

Self-regulation is also not the answer, that is a ship that has sailed. It should continue to implement changes where the evidence points to it and to set best practice with their current working parties but the industry has reached a point where trust has evaporated to such an extent that it can only hope to influence changes that may not go far enough for some.

Melanie Ellis, partner, Northridge Law LLP

The NAO identifies various inadequacies of the Gambling Commission, including not making effective use of its own data to identify issues, not adequately articulating what improved standards would look like, not understanding the effect of the penalties it applies and not exploring all options for good regulation.  The report also identifies delays between the Commission identifying weaknesses in its LCCP and bringing changes into effect.

These criticisms are not without basis and some reflect common complaints by the gambling operators the Commission regulates.  In particular, operators have long been asking the Commission to clearly set out what “good” looks like, not only to enable them to ensure they are operating appropriately but to create a level playing field where all operators are meeting the same clear standards, rather than their individual interpretations of vague guidelines.

The report identifies that the Commission is under-resourced, and its CEO Neil McArthur admitted as much in recent questioning by the House of Lords select committee.  The salaries it can pay its staff must be a significant factor in the loss of several knowledgeable and experienced employees in the last couple of years.  However, the APPG’s calls for Neil McArthur to resign seem to be a case of throwing the baby out with the bath water and are reminiscent of its call for a whole new Gambling Act rather than amendment of certain problematic provisions.

We also need to bear in mind that, while problem gambling is undeniably a mental health issue which needs to be addressed, the rate of problem gambling appears to be stable, if not slightly decreasing (as the Commission’s latest figures indicate).  There is only so much a regulator can do to reduce the rate of problem gambling and, in my view, there should be a much greater focus by the government on researching the causes of problem gambling and educating members of society, particularly those who are young and/or vulnerable, about the risks.