The Gambling (Gambling Harm Reduction) Amendment Bill

June 2012

The Gambling (Gambling Harm Reduction) Amendment Bill

Introduction
Many people are aware, through coverage in the news media and elsewhere, that Maori Party MP Te Ururoa Flavell has promoted a Private Member’s Bill on the regulation of gambling. The Bill is known as the Gambling (Gambling Harm Reduction) Amendment Bill, and it proposes a number of significant changes to the way in which gaming is conducted under the Gambling Act 2003.
Among the changes proposed by the Bill are:
• to enable local authorities to eliminate gaming machines from ‘Type 4′ establishments, such as bars and pubs;
• to pass control from charitable organisations to local councils and boards for licensing of gaming machines;
• requiring 80% of gaming profits to be returned to the community from which they were obtained; and
• the imposition of player tracking systems on gaming machines to track and help problem gamblers
The Bill has drawn a lot of comment from a wide range of interest groups. Many had made submissions on the Bill before the 21 June deadline. A broad coalition of the sporting sector, headed by the National Sports Organisations Leadership Group, highlighted the potential for harm to sports organisations (as the primary recipients of funding from the gaming sector). The NSO Leadership Group has undertaken a detailed analysis of what it says are those provisions which are the most problematic to community, regional, national and international sport in New Zealand.

However, rather than just voice its opposition because of the risk to the sport sector, the NSO Leadership Group has also taken the constructive step of advocating that reform to the country’s gaming laws should not be undertaken on an ad hoc basis. Instead, its approach is to seek a comprehensive review – to identify targeted, meaningful and verifiable ways to reduce harm from class 4 (gaming machine) gambling and for the outcomes of that review to be taken under consideration by the Government.
The problem
The ‘mischief’ that the Bill seeks to address is that of the need for sensible and effective measures to strengthen compliance and transparency in the distribution of the (net) proceeds from gaming machines. Sadly, gaming machine venues tend to be overly represented in lower income communities and the Bill’s promoter is worried that Maori and Pacific Island people are suffering a disproportionate level of harm from gaming (pokie) machine activity.
The proposed solutions
A snapshot of the solutions proposed by the Bill is:
• to enable local authorities, in consultation with their communities, to reduce (or even eliminate) the number of gaming machines from their area; and
• to change the responsibility for distributing gaming machine funds to provide what is described as “an informed and democratically accountable distribution method”, and to end what are seen as the inefficiencies, lack of transparency, risks of unethical behaviour, as well as a failure to respond to community needs in the distribution of the funds from gaming machines.
The solutions proposed by the Bill are in five parts:
• Gambling venues: The Bill proposes adding public sentiment and evidence of harm to the (main) criteria to be applied in developing a local authority’s gaming venue policy. Consequently, it is proposed to enable local authorities, after consulting with their community and affected operators, to reduce (or eliminate) the number of gaming machines and venues in particular communities – where public sentiment or evidence of harm justifies this. And this is to be coupled with a specific new power to phase out venues that were in operation at the time the Gambling Act came into force or have since commenced operation. A 12 month sunset period would apply to operators who have not otherwise breached any licence conditions. (And all new licences would be a (renewable) period of 3 years – with the local authority’s gambling venue policy being the subject of review at 3-yearly intervals).
• Removal of special treatment for horse racing: Racing and racing-stake money are to be excluded from the definition of an authorised “charitable” purpose – on the basis that this special treatment is inconsistent with the community benefit tenor of the rest of the Gambling Act and should not continue when community and iwi organisations are desperately short of funding.
• The 80% rule: The proceeds of pokie machine gaming are to be applied primarily for the benefit of community, sporting, and social-service organisations operating within (and for the benefit of) the community in which the venue is located. A minimum threshold of 80% of the funds generated by local pokie machines is to be ploughed back into the charities meeting priority needs in the same area as the venue. The sponsor of the Bill notes that the net proceeds from pokie machine gaming are required to be used to make grants for “authorised purposes” but that only a small proportion of goes back into the local community because the majority of the gamblers’ losses go to pay machine site rentals, machine maintenance and the costs of running “pokie trusts”. There are also concerns that the proceeds are used to make grants outside the relevant community including to national bodies and that the present system of using the proceeds is inefficient and/or subject to rorts.
• Local authority takeover: The Bill seeks to phase out the pokie trusts as the distributors of the proceeds of pokie machine gaming and pass the responsibility for distributions to special committees of local authorities made up of representatives of community organisations. This model is said to be borrowed from the Creative New Zealand creative communities fund committees. The Creative New Zealand model uses per capita allocations – and the Bill would set up a parallel system to apply the proceeds to community, social-service, iwi, and sporting groups on a “fair, informed, transparent, and accountable basis”.
• Tracking problem gamblers: As a condition of their licence, pokie machine venue operators are to be required to keep track of each gambler’s overall losses and time spent gambling through using common technological devices like player tracking systems. Gamblers are to be equipped with ‘pre-commit cards’ so that gamblers can restore control over their own behaviour.
NSO Leadership Group concerns

The NSO Leadership Group is concerned that the phasing out of gaming machine trusts and handing over the responsibility for the distribution of the proceeds of pokie machine gaming to local authority committees (to be applied in the community where the relevant venue is located) would be a massive ‘sea change’ to the funding of sport in this country and could bring sport to a near standstill. Instead, the NSO Leadership Group lends its support to meaningful and verifiable efforts to reduce harm from all forms of legal gambling – as well as supporting meaningful and efficient efforts to improve compliance and enhance transparency.
In particular, the NSO Leadership Group is concerned about:
• The upheaval in sport funding: The NSO Leadership Group is concerned that the hard won gains made by NSOs over the last decade or more may be lost as sports are forced to consolidate and refocus on survival. This, it sees, as triggering a loss of opportunities for participation in amateur sports by individuals and communities – risking a loss of value and (threateningly) a backlash from participants and volunteers, and their families / friends and supporters. In particular, it refers to:
o a loss or reduction in centralised administrative and governance capacity and capability that will hinder the ability of the Government and its agencies to engage on a national level over issues of national significance;
o widespread instability in the finances of community sport – which (amongst other things) will undermine the ability of NSOs to attract commercial partners and corporate sponsors;
o a negative impact on event planning, which involves a long lead times and certainty around funding ;
o the growing complexity of sports administration as sports seek to meet the need for ever higher standards of quality and accountability – as well as growing demands for higher levels of support and education from participants and other stakeholders ; and
o the threat to the efforts by NSOs to embrace the benefits of developing and implementing (nationally) consistent community services as best practice; and
o the undermining of continuous improvement from administration and governance to anticipate potential issues and identify realistic and achievable growth targets.
These matters are seen as being highlighted in the current economic climate which makes securing funding from alternative sources very difficult. As a result, the NSO Leadership Group says that participants in sport will pay the price for the change to the funding mechanism through higher costs and barriers to access at all levels, with resulting lower participation impacting on health and wellbeing.
• Access to national funding and certainty of funding year-on-year: The NSO Leadership Group is concerned that access to centralised national funding is essential for continued systematic and consistent promotion and development of sport throughout New Zealand, to the recruitment and training of volunteers, coaches and officials, to opportunities to participate in organised amateur sport and the reduction in barriers to access to participation. By contrast, it says the proposal to fragment the funding mechanism between local authority committees will place undue pressure on existing sport organisation governance and management structures and lead to inefficient and uneven access to opportunities to participate in sport. And this fragmentation will exacerbate inconsistencies in resourcing at the local and regional level by removing / reducing the ability to direct (or redirect) resources to areas of greatest need.
• The impact on high-profile sporting events: The NSO Leadership Group says that, by removing access to funding from pokie machine gaming at a national level, there will be a material impact on sports events and programmes delivered at a national, regional (as well as local) level outside districts with pokie machines. It is suggested that a significant number of sporting events will either cease in future or be seriously compromised as a result of the funding changes proposed in the Bill. A number of high-profile national and regional events across a broad spectrum of sports are cited – all affecting sports with high participation levels.
• The fragmenting and politicising of the funding model: In an echo of an earlier point, the NSO Leadership Group says that this has the potential to undermine independence and transparency and replace merit with parochialism. Again, the concern is the impact on grants for sports on a national basis – particularly the impact on strategic planning of sport development, consistency across (and within) sports and on participation levels at a local, regional and national level, and at an international level. Further concerns include:
o the potential loss of institutional knowledge of sports funding built up by gaming trusts – which will not transition to the local authority committees because of their (inherently) local focus;
o the political nature of the local authority committees – and the impact of ‘parish pump’ politics;
o an unhealthy closeness between funder and applicant – and the risk of misallocations and inefficiencies in funding due to ill-informed investment decisions;
o the conflicting roles within local authorities – with the authority being both regulator (determining the number and place of venues and the number of gaming machines in each venue) and acting as the distributor of the proceeds of gaming in their own community; and
o that local authorities will fund the operation of the new committees (and the bureaucracy to support them) from the proceeds available for distribution – thereby further reducing the funds available to sport.
The need for meaningful / verifiable measures to reduce harm

The NSO Leadership Group acknowledges the need to examine ways to reduce the harm caused by problem-gambling and its impact on families and communities. There is, however, disagreement about the implicit link that appears to be made by the promoter of the Bill between problem-gambling and the centralised funding of sport from gaming proceeds. In a “Don’t throw the baby out with the bathwater” plea, the NSO Leadership Group submits that, by targeting the mechanism for sport funding as a means of delivering (gambling) harm reduction – the Bill puts at risk the benefits of mass participation in community sport. This, it submits, greatly outweighs the benefits that may arise for problem-gamblers and the community from the proposed changes. Instead, whilst noting a 29% reduction in the number of gaming machines over the last 8 years, the NSO Leadership Group says it would support a review of the effectiveness of the Gambling Act to strengthen protections for gamblers and their families in order to genuinely minimise harm.

Concluding comments

The Bill appears to be a well-meaning attempt to address concerns both about the impact of gaming machine gambling on some parts of the community and concerns about the inefficiencies that appear to be generated by the present system for allocating the proceeds of pokie machine gaming. At a glance a more fundamental, policy-based, approach is required to consider the impacts issue – rather than ad hoc policy making. As to the second issue, there is plenty of anecdotal evidence that some parts of the distribution machinery require more work.

Whilst the National Party has supported the efforts of its Maori Party coalition partner, thereby enabling the Bill to go to Select Committee, a Select Committee process is probably not the right forum for gathering all of the inputs to enable some of the “kinks” to be worked out of the present system. More recent developments, including another knock-on impact of the Christchurch earthquakes, that see an increasing majority of the pokie machine “take” gathered in Auckland by a broad spectrum of interests and then re-distributed (in some cases probably quite efficiently – and in others possibly not), the lasting impacts of the GFC and growing awareness of the impact of major youth demographic in the Auckland / Hamilton / Tauranga triangle would point to the need for a reassessment.
It seems highly unlikely that the same government that is seeking to trim the power of “general competence” on the part of local government and, thereby, roll back the expansion of local government activities, debt levels and rate increases – would allow some sort of loose coalition of local government-led ad hoc committees to exercise the power of allocating sizeable chunks of funding for gaming machine funding. This would not give the appearance of fixing the problem or consistency with the message of fiscal responsibility that the Government is trying to sheet home.
It also seems unlikely that, in an Olympic year, that the Government would undertake such a fundamental change to the funding mechanism for sport, when faced with submissions that it will inflict lasting and widespread damage to many sports and impose a major setback on sports administration (and disadvantage our sportspeople on the world stage).

Instead, some improvements to issues such as consistency, efficiency and transparency are likely to be achieved, organically, by the sports and gaming industry continuing to work together with initiatives such as shared services arrangements and efforts to reduce the level of fragmentation in the funding process. In other areas, we may be able to borrow from experiences in Australian and further afield, and (above all else) avoid the risk that the funding of sport become further clouded or weighed down by ‘parish pump’ politics and petty regional or local rivalries.