The Gambling (Gambling Harm Reduction) Amendment Bill – Reported Back

21 June 2013

The Gambling (Gambling Harm Reduction) Amendment Bill – Reported Back

Introduction

This time last year the news media was giving wide coverage of a Private Member’s Bill promoted by Maori Party MP Te Ururoa Flavell on the regulation of gambling. Entitled the Gambling (Gambling Harm Reduction) Amendment Bill, it contained proposals for a number of significant changes to the way in which gaming is conducted under the Gambling Act 2003.
Those changes included:
• passing 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 drew a lot of comment from a wide range of interest groups. In particular, a broad coalition from the sports 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 took the constructive step of advocating that reform to the country’s gaming laws should not be undertaken on an ad hoc basis. Instead, it suggested that legislative change should only come from a comprehensive review – to identify targeted, meaningful and verifiable ways to reduce harm from class 4 (gaming machine) gambling.

The Bill was reported back from the Select Committee process this week and, amongst the media headlines about watering down and weakening, it contains some interesting developments for non-casino gambling. At the same time, Internal Affairs Minister Chris Tremain and Te Ururoa Flavell announced a harm-minimisation package that is outlined below.

Central to the media claims about winners and losers from the Select Committee is rejection of the proposal to return 80% of profits, which has been replaced with regulations to ensure more of the proceeds returned to the same geographical area. Media reports the Minister as saying that this will increase the proportion of the “take” going back into the community from 37% to 40% – but there is no indication how much (if any) must go back into the specific community that provided it.

Also, there is to be no imposition of pre-commitment, player tracking, or other harm-minimisation devices, on the basis that it would be “premature to mandate specific approaches”.

Content and conditions of licences

In place of the provisions in the initial draft of the Bill making it a condition of a gaming (pokie) machine operators’ licences that at least 80% of all funds derived from gambling are distributed back into the same local authority district in which they were raised are regulation-making powers relating to the distribution of those funds. This allows the making of regulations to prescribe requirements for the distribution of net proceeds taking into account the geographical area where the proceeds were generated.

In this regard, the Select Committee notes its support for the principle of returning net proceeds to the area where the gambling took place, as long as national or regional organisations are not disadvantaged. However, the Select Committee report notes that requiring all class 4 (pokie machine gaming) societies to distribute their net proceeds to locally-defined areas would also create other complications. For example, gaming machines are not evenly spread across electoral districts, and restricting distributions would have resulted in little or no proceeds being distributed in some areas.

Also, as introduced, the Bill did not take account of gaming machines being used by people from outside the area. It would also allow societies to appeal licence conditions to the Gambling Commission, so that a licence condition requiring local distribution might be removed anyway.

The new regulation-making powers would offer a flexible approach to regulations and help prevent such anomalies – acknowledging that national and regional organisations provide benefits to the community defined more widely. The regulation-making process would require consultation with the sector and others likely to be substantially affected by the change – with the aim of mitigating any potential adverse effects.

Harm minimisation technology

The Select Committee also recommended a replacement for the initial proposal to directly imposing conditions on licences, requiring the use of pre-commitment, player tracking, or other harm minimisation devices in pokie machines. However, as the Bill was initially structured, such a licence condition could have been removed on appeal to the Gambling Commission. Instead, regulations relating to pokie machines could do the same. This, the Select Committee believes, would allow a more robust and flexible response to changing technology.

The Select Committee also notes that, currently, there is no requirement for pokie machine operators to use pre-commitment, player tracking, or other devices designed to minimise gambling-related harm. In addition, no specific research on pre-commitment or player tracking has yet been undertaken in New Zealand. The Select Committee supports the use of technology to help minimise gambling harm, but signaled a belief that it would be premature to mandate specific approaches. Instead, because research continues to become available, and technologies continue to improve and change, a regulation-making power rather than prescribing specific measures is suggested as the right approach.

Proposed local authority requirements

The Bill initially proposed that local authorities would be required to review class 4 (pokie machine) gaming policies every 3 years and provide consents on an on-going basis. The Select Committee considered this would be unduly expensive for venues and territorial authorities.

Also, as introduced, the Bill would have allowed local authorities to include policies that reduce or prohibit venues, taking into account public sentiment. The Select Committee was concerned that it would be difficult to decide on a principled basis, for example, which venues should cease to operate, and the Bill offered no guidance or criteria for making these decisions.

Instead, the Select Committee has proposed amendments to create greater certainty for venue operators and allow them to make investment decisions with confidence. This would allow local authorities to include relocation policies in their pokie machine venue policies, which would set out if and when new venues could be granted consent in place of existing venues. Also, local authorities would be required, at the next review of their pokie machine venue policies, to consider whether or not to include a relocation policy. When developing a relocation policy, local authorities would have to consider the social effects of gambling in high-deprivation communities.

Responsibility for distributing funds

The Select Committee recommends deleting any powers in the Bill, as introduced, for local authorities to be responsible for distributing the proceeds of gambling. This, the Select Committee considers, is outside the core function of local government and would create a conflict of interest because territorial authorities can themselves apply for grants.

Relocation of venues

A new provision has also been added to preserve the rights attaching to previous venues when a licence is transferred to new premises. The new venue would be permitted to operate the same number of pokie machines as was permitted at the old venue. This would apply only if the local authority had given consent for the new venue in accordance with its relocation policy.

Venues that were licensed before 17 October 2001 have maintained the right to operate more than nine machines, which is the current legislative limit. A venue currently loses this right if it moves premises, as the licence is attached to the physical venue. This discourages venues from moving to a more suitable location.

And a new provision has been added providing that no compensation is payable by the Crown or local authorities for any loss arising from the enactment of the new scope for a relocation policy.

(Horse) racing clubs

The provision of the Bill as introduced which would have removed horse racing as an “authorised purpose” for class 4 gambling. In New Zealand Racing Industry Board v The Attorney General , the High Court found that racing clubs have a non-commercial purpose. They are non-profit organisations, which provide facilities to community groups at low or no cost, and in this way they are similar to other sports clubs. The Select Committee considered the removal of funding would have an adverse effect on communities and racing-related economic activity.

NSO Leadership Group concerns

The changes to the Bill, as reported back, address the primary concerns of the NSO Leadership Group about 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). As a result, the massive ‘sea change’ to the funding of sport in this country has been averted along with such as issues as:
• concerns about access to national funding and certainty of funding year-on-year;
• the potential impact on high-profile sporting events; and
• the potential fragmentation (and politicising) of the funding model.

The need for meaningful / verifiable measures to reduce harm

The Bill as first introduced also brought acknowledgements from affected parties, such as the NSO Leadership Group, of the need to examine ways to reduce the harm caused by problem-gambling and its impact on families and communities.

These concerns appear to have been recognised and, coinciding with the reporting back by the Select Committee, Internal Affairs Minister Chris Tremain has announced what is described as a “balanced package of reforms” in the Class 4 (pokie machine) gaming sector. As part of that announcement, the Minister referred to a clear need for reform and the Minister said that he had worked with Te Ururoa Flavell on the first in a set of significant changes.

The Minister has also stated an intention to introduce further legislation and regulations to address other issues that have been identified in the pokie machine sector. These reforms will focus on improving the transparency of grants to community groups, increasing the amount of funding that goes back to the community and reducing unnecessary compliance costs for Class 4 operators.

One of the issues highlighted by the Minister is public concerns over conflicts of interest – as a result he has announced that he will introduce legislation to capture and prosecute “rorts” more easily and restore the ability of DIA to cancel or suspend Class 4 licences as a penalty. And he added that societies and venues who are compliant and show best practice will be granted longer licences as an incentive.

The Minister added that the way that societies pay bars and pubs to host pokie machines is extremely complicated and needs to be simplified. This will reduce compliance costs, enabling more money to be returned to community groups.

At the same time, the Minister is seeking greater transparency about how grant decisions are made so the community is better informed about that process.

He said that he is also proposing to lift the minimum rate of return to the community over time. Based on the current turnover, the Minister said that for every 1% average increase there is a return of an additional $7m to the community.

Also, as a way of reducing costs to societies information will only need to be published online rather than in a newspaper.

Concluding comments

The Bill, as first introduced, was a well-meaning (but flawed) 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. The government has tried to respond with a more policy-based approach as a first step towards considering the impacts issue. At the same time it has made some steps towards addressing inefficiencies in the distribution machinery.

Arguably, this process shows MMP at work. The National Party has worked with and supported the efforts of its Maori Party coalition partner, thereby enabling the Bill to go to Select Committee. A Select Committee process is not the right forum for addressing all of the relevant policy issues, so the outcome is an interim step on some aspects of the current system. As a result, a regulation-making power provides a more flexible framework to deal with that research and those new developments. At the same time, there is a signal that the DIA is likely to have a watching brief on research about the social impacts and the advance of new technologies.

The Bill as reported back provides a better framework to enable local authorities to deal with demographic changes such as the knock-on impact of the Christchurch earthquakes, and the increasing proportion of the pokie machine “take” gathered in Auckland by a broad spectrum of interests.

Clearly, there is likely to be a further period of developing and implementing the new regulations and monitoring the impact to see if the package generates the desired efficiencies and transparency in gathering and distributing community funding. The package removes the flaws in the original ‘Flavell bill’ and thereby alleviates the concerns about local authority “control” of distributions and the hints of political patronage.

Finally, while the media likes to play a game of winners and losers, there is more than just window dressing and photo-ops in the Minister’s congratulations and thanks to Mr Flavell for his commitment to addressing gambling-related harm. By taking a balanced perspective and recognising the important role of class 4 societies in community funding, the government’s coalition partner has opened the door to further, and more measured reforms, in this sector over time in conjunction with ongoing research.

If you would like more information about the Gambling (Gambling Harm Reduction) Amendment Bill, please contact me.