Considered in Grand Committee
That the Grand Committee do report to the House that it has considered the Public Bodies (Merger of the Gambling Commission and the National Lottery Commission) Order 2013.
Relevant documents: 35th Report from the Secondary Legislation Scrutiny Committee, Session 2012-13, 23rd Report from the Joint Committee on Statutory Instruments, Session 2012-13.
My Lords, this is an administrative change that will provide some efficiency savings but that will be principally beneficial for the policy synergies and economies of scale obtainable from a single regulator in understanding and regulating the whole gambling market. This merger was first proposed by the previous Government, and the coalition has continued this support.
The Public Bodies Act 2011 provides a legal framework that enables the Government to propose the merger of specified bodies. The two commissions are so specified. This merger will ensure an integrated approach to consumer protection and allow the merged commission to advise the Government on gambling in the round.
The functions of both commissions are broadly similar, especially with regard to social responsibility. The National Lottery Commission ensures that the National Lottery is run with all due propriety and protects the interests of every participant. Subject to these duties, the NLC must do its best to maximise the money available to good causes.
Similarly, the Gambling Commission is responsible for ensuring that gambling is conducted fairly and openly, that children and vulnerable people are protected and that gambling is not a source of crime and disorder. It aims to permit gambling that is reasonably consistent with its pursuit of these licensing objectives.
Nothing in the order would affect the way in which the National Lottery and the gambling industry are at present regulated by their respective commissions; the merged body will retain the statutory functions of the existing commissions. However, the gambling industry, including the society lotteries sector, has expressed some concerns that the NLC’s duty to maximise National Lottery returns might be seen to influence regulatory decisions on commercial gambling or the provision of advice to government in favour of the National Lottery.
The key to addressing this is for the merged body to be absolutely clear as to the statutory regime within which each such decision is taken. The commission will ensure that decisions are taken within the appropriate legislative framework and that they do not take into account considerations that are irrelevant in that context, such as those applicable only to the other regime. Therefore, when making a regulatory decision on commercial gambling, which includes the society lotteries sector, considerations about the impact that this might have on the National Lottery will be irrelevant, and vice versa.
The merged organisation, like the individual commissions at present, will continue to give reasons for its decisions and be subject to judicial oversight via judicial review or the gambling appeals tribunal if, for example, it is thought to have taken into account irrelevant considerations or misused confidential information.
In addition to the preservation of separate legislative regimes and protections for the National Lottery and other gambling, the DCMS is taking further steps to ensure that its oversight of the merged commission continues to provide the appropriate level of accountability. The Minister for Sport and Tourism has written to the Gambling Commission to set out what the Government will require of the merged commission. This letter was copied to the House of Lords Secondary Legislation Scrutiny Committee by way of response to its report dated 26 April 2013. I have ensured that copies of this letter are on the table here for your Lordships’ perusal. I apologise that it has not been possible to make a copy for your Lordships available earlier, but I know that the noble Baroness, Lady Jones, has received a copy.
The Gambling Commission will put in place arrangements to ensure the following: that only relevant considerations are taken into account when making decisions; that the merged commission gives adequate reasons for these decisions; that appropriate information barriers are in place to avoid any actual, or perceived, conflicts of interest arising in the exercise of its functions under the relevant legislation; and that those handling operator-specific information are properly trained in data security protocols. In order to support these requirements, the commission is already planning to establish a sub-committee to make recommendations to the board on National Lottery issues.
All these assurance measures will be reflected in the management agreement, which will be settled between the DCMS and the merged commission in due course. This agreement will inform and underpin the department’s relationship with the merged commission. It will specify the steps that the merged commission will be expected to take to demonstrate impartiality and that the chairman and commissioners are responsible for implementing appropriate governance arrangements to manage any real, or perceived, conflicts of interest.
Given the distinct and self-contained statutory regimes relating to the National Lottery and other gambling matters, we believe that any such conflicts can be readily managed and that it is unnecessary to be prescriptive about the precise governance arrangements in legislation or the management agreement. This will preserve the merged commission’s ability to amend arrangements in the light of experience while continuing to respect the general principles set out in the management agreement. The Gambling Commission and the National Lottery Commission both support this merger.
Together, the collocation of the two commissions and the shared service arrangements that they have in place have, since January 2012, generated efficiency savings, while steps have already been taken to embed National Lottery expertise within the Gambling Commission. These actions have generated upfront costs but alongside the merger provide a sound basis for savings over the medium and long term. Once costs have fallen away, these initiatives will save more than £1.1 million per annum. The merger of the two commissions will itself generate a total saving for licence fee payers and lottery good causes of £330,000 over the 10-year assessment period considered by the Public Bodies Act.
In summary, this order will create a single organisation that is better able to provide comprehensive advice and guidance to the Government on all gambling issues, including the continuing protection of the public. The two organisations are already integrated in a number of respects, and approval of this order will allow us to realise further savings and additional benefits. I recommend this order to your Lordships.
My Lords, the short speech I was planning to make has changed dramatically as a result of the Minister’s opening speech, which I very much welcome. I was going to raise the conflict of interest between the Gambling Commission and the National Lottery Commission, an issue which the Secondary Legislation Scrutiny Committee picked up on and which I referred to during Committee on the Public Bodies Bill in March 2011. I made the point that from the inception of the National Lottery, the National Lottery Commission has operated with an inherent conflict of interest in that, as the Minister said, it is required to maximise the return for good causes but at the same time is supposed to protect players’ interests. I do not believe that the National Lottery Commission has, up to now, succeeded in doing that.
In drawing attention to this during Committee on the Public Bodies Bill, I expressed the hope that the merger of the two bodies would be resolved in future. The Minister was not quite right to say that the previous Administration had supported this merger. The Joint Committee on the draft Gambling Bill supported it, but the Government of the time unfortunately rejected the merger of the two bodies. To avoid wearying the Committee now, I will not quote what Lord McIntosh said for the Government on that occasion about those being two different jobs.
I listened very carefully to what the Minister said about how in future this conflict will be resolved. I want to read carefully what he has said, but the objections that I raised in March 2011 on the Public Bodies Bill seem substantially to have been met by what he has said this afternoon. I would like just one assurance, if he is able to give it to me: that he feels that the resources available to the Gambling Commission will be sufficient to do this job properly, because along with the obvious need for the National Lottery to be a success, player protection is very important.
My Lords, I thank the Minister very much for his explanation of the order. I also thank him for the helpful information that he sent in advance of the debate, including the letter from Hugh Robertson to the chair of the Gambling Commission. I will return to that letter and that issue shortly.
First, I make the more general point that I understand that much of the impetus for this merger is to save money, and I do not doubt that there are savings to be made. I know that the House of Commons Culture, Media and Sport Select Committee report questioned the figures provided and felt that the overall savings should be greater. It is of course incumbent on any organisation in receipt of public money to spend that money wisely. I hope that the Gambling Commission will be held to account for this expenditure in due course.
However, I will not focus on the financial implications as I want to explore other, more pressing issues with the Minister this afternoon. We share the growing concern that gambling is running out of control. The spiralling rise of online gambling, now a £2 billion a year industry, risks damaging the health and well-being of a generation. We already know that nearly 1 million people are in danger of becoming problem gamblers and that there are already 500,000 hard-core addicts. Meanwhile, one of the Gambling Commission’s clear functions is already to protect children and vulnerable adults from being harmed or exploited by gambling, so by most measures it would appear that it is failing in that task. In that context, we need to be satisfied that the proposed merger is in the public interest and that the new, merged Gambling Commission is fit for purpose in the light of this crisis. Therefore, I should like to ask the Minister some questions.
First, is there a danger that we are rushing this decision without giving the proposal adequate consideration? The Commons Select Committee that considered this matter made two important recommendations, which need to be addressed before a final decision is made. Regrettably, I do not think that Hugh Robertson’s letter adequately addresses these issues. I take the point that we have had very little time to consider that letter. For example, the Select Committee recommended that the Gambling Commission outline the governance arrangements that it will put in place to ensure that there is a robust separation of its duties to oversee the lottery and gambling organisations to avoid the conflicts of interest to which my noble friend referred. It recommended that the details be published by the Gambling Commission in time for consideration of the order in this House. I agree that this information would have been extremely useful if it had been before us today, but it does not seem to have been provided by the Gambling Commission, unless my internet searches have failed on this occasion.
What is more, I do not believe that its original suggestion that it would set up a sub-committee to deal with lottery issues is adequate to address the governance issues. The Select Committee also recommended that the DCMS outline what steps it would take to monitor the Gambling Commission’s execution of its combined duties and what action it proposed to take if it was seen not to be acting even-handedly. I understand that Hugh Robertson’s letter is intended to address this issue by setting out what the DCMS would like to see in the management agreement with the Gambling Commission. However, we have not seen the response to Hugh Robertson’s letter from the Gambling Commission, and I should like to hear what it has to say on the matter.
Incidentally, the Minister also asked the Gambling Commission to put his letter on its website in time for this debate, but at midday today I could not find it there. Again, that might be a failure on the part of my internet search skills, but at the moment there seems to be an ominous silence from the Gambling Commission.
Also, the Minister’s letter does not adequately address the Select Committee’s question about what action the DCMS would take if, for example, there was evidence that the funding of good causes was suffering as a result of the merger. Therefore, first, given that the Select Committee’s report on this issue was published on only 2 July and that, as I understand it, the Commons will not be considering this order until September, does the Minister not think that a decision on the order should be delayed to allow all the information to be presented to this House and fully considered?
Secondly, the Minister will be aware that there are anomalies in how the National Lottery is treated compared with other society lotteries—for example, in the specified percentage required to be given to good causes and the duty of 12% that is paid to government. I gather that the DCMS is due to hold a consultation on the minimum that should be donated to good causes, and I welcome that. Also, as I understand it, the recent High Court judgment on the status of the Health Lottery, run by Richard Desmond, ruled that this was a matter for government rather than the courts. Would this merger not have been a convenient time to address these issues and the protections that need to be put in place to regulate other society and commercial lotteries that may be established?
Thirdly, is the Minister satisfied that the Gambling Commission is operating in a sufficiently transparent way? The vast majority of society lotteries raise significant sums of money for the causes which they support, but the percentage of income which they donate varies considerably. I tried to explore this a little in a recent Written Question to the Minister. In his reply, he said that the commission publishes aggregates of the financial details of these schemes. However, is that really good enough? Does the Minister feel that the Gambling Commission could do more to share information about the individual profits and donations of these lottery schemes, and, again, does he feel that this could have been addressed as part of the merger?
Crucial to any changes has to be the need to protect the £2 billion given to good causes by the National Lottery, which has become a respected national institution. The Gambling Commission could do more to reassure us that it has robust governance systems in place to ring-fence and nurture the development of the lottery while cracking down on exploitative commercial and on-line gambling.
I hope the Minister will address these concerns and more fully consider a postponement of the final decision on this order to allow for the letters to be read and for all the information to be presented to us in a proper form so that scrutiny can take place. I look forward to hearing his response to these questions.
My Lords, I should have put on the record at the start of my speech my entry in the register. I am a gambling regulator as a member of the Alderney Gambling Control Commission.
My Lords, I thank noble Lords for the points that have been raised and hope that I can allay some residual concerns. Perhaps the noble Baroness and any other noble Lord would care to have a meeting with me and my officials before the House rises if there are any issues that I might not be able to satisfy in my closing remarks. I will be very happy to discuss further any issues that I cannot satisfy today.
The noble Baroness, Lady Jones, referred to problem gambling. I strongly support the Gambling Commission and its advisory body, the Responsible Gambling Strategy Board, in their efforts to determine whether the level of gambling-related harm is increasing and what can be done to reduce it. The conundrum with which all Governments grapple is how to balance the enjoyment of the large majority who gamble safely—of course, gambling brings considerable economic and other benefits, whether employment, tax or proceeds for good causes—with finding ways to identify those at risk of harming themselves and reduce the risk of such harm.
We need the gambling industry to help drive the search for improved ways of mitigating the risks as the quid pro quo of being allowed to trade. It should be recognised that the level of problem gambling is less than 1% of the population, but we must be watchful through appropriate legislation and the work of the commission, which is informed by the Responsible Gambling Strategy Board.
I was going to say that this order has been supported by this Government and their predecessors, but the noble Lord, Lord Faulkner, reminds me that that might not be the case. I also have in my notes a suggestion that this measure was supported in both the Conservative Party and Labour Party manifestos at the last election. I had therefore better look back into the records to see how all this corresponds with the facts. However, I can say that this issue has been at large for both Governments to consider.
The order will merge two bodies with similar responsibilities, aims and objectives, as I have said. Having a single regulator that understands and regulates the whole gambling market will provide desirable policy synergies. This can be achieved while effectively managing sensitive data, handling two sets of legislation and preserving the commitment by the regulator’s predecessors to consumer protection. This is well within the capability of the Gambling Commission. While creating a single entity ensures a common approach and in-the-round advice on gambling to government, this merger will also generate savings for the industry and lottery good causes. This is a clear benefit because we want as much of these savings as possible to remain for good causes.
Neither committee in either House objected to the merger but both have requested that we publish guidance on how the Gambling Commission will maintain its impartiality. As I said earlier, a copy of the Minister’s letter to the chairman of the Gambling Commission outlining the governance arrangements that the Gambling Commission will implement is available. I am mindful of what the noble Baroness has said and I may need to reflect on that and discuss it with her. In particular, it is important that we look at the response from the Gambling Commission.
This merger has been under consideration and we have been talking to officials for a very long time. Indeed, if it had not been for the National Lottery licence competition, this proposal might well have been presented by the previous Government. For that reason, I do not think that the merger itself is a rushed affair. However, we need to make sure that the fine tuning and governance arrangements are fit for purpose. I would like to have discussions with the noble Baronesses on that.
These measures set out the responsibilities of the Gambling Commission’s board in ensuring impartiality, appropriate use of data and protection against any real or perceived conflicts of interest. In addition to these governance safeguards, judicial safeguards are also in place. The Gambling Commission works as a transparent, fully accountable organisation. It reports on its work to the department and Parliament. It will continue to give reasons for its decision. Anyone aggrieved can, and I have no doubt will, make their concerns known to the commission. It will of course be necessary to take care that stakeholders do not confuse objections to decisions taken with indications of bias.
The noble Baroness, Lady Jones, raised the issue of society lotteries as part of this merger. While Parliament determined that at least 20% of the proceeds of each draw should go to that society’s good cause, there are no set limits on the amount of expenses, although they must be reasonable. The Gambling Commission is subject to data protection legislation and such information about individual operators is commercially sensitive and provided in confidence. Whether we should require societies to provide greater detail about allocation of their returns is indeed an interesting point. However, it should be noted that to do so may seem overregulatory. Matters such as these should be discussed during the Government’s forthcoming consultation on society lotteries, which will set out the Government’s thinking in this area.
The noble Lord, Lord Faulkner, mentioned resources. The Gambling Commission is funded through a combination of licence fees and grant in aid from the department. DCMS agrees the latter as part of good causes. The licence fees are set by the Gambling Commission at an appropriate level to ensure an adequate regime, and that obviously includes management of conflicts. I wanted to give the noble Lord that assurance.
My understanding is, and I have a note here to say, that the Government revisited this issue as part of the 2010 Budget and recommended this at that stage, which suggests that consideration of the principle has been ongoing for some time. The merger of these two bodies remains an extremely sensible proposition. I am happy to meet noble Lords for a discussion and then I hope to see the reply from the Gambling Commission. I wish to be helpful to your Lordships. Therefore, at this stage, given that this is consideration of the matter, I beg to move.