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Gambling Commission: A Hampton Implementation Review Report

A review supported by theBetter Regulation Executiveand National Audit Office

Gambling Commission: A Hampton Implementation Review Report2

3Gambling Commission: A Hampton Implementation Review Report

Foreword

Philip Hampton’s report: Reducing administrative burdens: effective inspection and enforcement,published in 2005, is one of the cornerstones of the government’s better regulation agenda. Theprinciples of effective inspection and enforcement set out in the report, putting risk assessment atthe heart of regulatory activity, are designed to encourage a modern regulatory system which properlybalances protection and prosperity. Since 2005, the Government has established an expectation thatregulators will embed these principles in their approach to regulation.

In November 2006, the Chancellor of the Exchequer invited the National Audit Office and the BetterRegulation Executive to develop a process of external review to assess how much progressregulators had made in implementing the principles of Hampton.

“Hampton Implementation Reports” covering the work of five major regulators were published inMarch 2008. The review process is continuing. At this point in the cycle we are publishing the resultsof reviews of three regulators, each of which has a significant impact on their specific economicsectors. Together, the Gambling Commission, the Medicines and Healthcare products RegulatoryAgency, and the Animal Health agency cover a wide range of economic activity, and work to protectour interests. How they carry out their regulatory activities matters.

Full implementation of Philip Hampton’s recommendations is a journey that could take several years.This review is a ‘snapshot’ in time of the progress of each regulator towards his vision.

Each of the reviews found examples of innovation and initiative by regulators who continue to movethe regulatory agenda forward, as well as areas for further improvement.

The assessments were carried out by teams of reviewers with wide ranging experience and expertisein the field of regulation. Talking to a wide range of stakeholders, to staff at all levels within theregulator’s organisation, through visits to business sites and analysis of data and papers, the reviewteams have reached the findings and conclusions set out in this report. The reports reflect thejudgement of these review teams on the basis of the evidence put before them.

We would like to thank all of those who have continued to make these reviews a success. Inparticular, we are grateful to the regulators and their staff for providing support and making evidenceavailable to the review teams, and to all the organisations that generously gave their time to offerevidence to the reviews. Finally, we are extremely grateful to all our reviewers, and their employers,for their involvement, enthusiasm and commitment to this project.

Jitinder KohliChief ExecutiveBetter Regulation Executive

Ed HumphersonAssistant Auditor GeneralNational Audit Office


a fully risk-based approach and in improvingeconomic modelling.

The Commission has only exercised fullstatutory powers since September 2007: whileit has consulted extensively on proposals forcarrying out its regulatory responsibilities, manyof its plans have yet to take effect on theground, and it is too early to comment on theimpact of some of these. The Commission,having completed a significant task in licensingall relevant operators under a new regulatoryregime, is entering a phase of consolidation. Webelieve that if current plans are successfullyimplemented (particularly proposals in relationto the more effective use of risk assessment aspresented to us throughout the Review), itshould be in a strong position to demonstratethe Hampton and Macrory principles throughoutits work. We acknowledge the scale of the tasksconfronting the Commission as a new regulator,and were impressed by the skills andcommitment that the Commission’s staffbrought to bear in tackling these.

The Commission asked that it should bereviewed in October 2008, early in the cycle ofHampton Implementation Reviews taking placein 2008/09. Inevitably the findings of theReview reflect the fact that the regulator is at anearly stage in its work. It also reflects theCommission’s concern to quickly identify andaddress any issues regarding the achievementof full Hampton compliance early in thedevelopment of its work.

Amongst the challenges facing the Commission,we were interested in the nature of itsrelationship with its stakeholders, particularlyfrom the gambling industry. The quality of thisrelationship is critical to the long-term successof the Commission in pursuing its statutoryobjectives. The quality of communicationbetween the regulator and the industry remainsa significant issue here. Difficulties in therelationship in part reflect a number of factors

Summary and conclusions

This review is one of a series of reviews ofregulatory bodies undertaken at the invitation ofHM Treasury and focusing on the assessmentof regulatory performance against the Hamptonprinciples and Macrory characteristics ofeffective inspection and enforcement. It wascarried out by a team drawn from the BetterRegulation Executive (BRE), the National AuditOffice (NAO), the Security Industry Authority(SIA), and the UK manufacturing employers’organisation EEF. See Appendix 1 for ReviewTeam membership.

The Hampton report 1, published in 2005, is oneof the cornerstones of the Government’s betterregulation agenda and regulators have beenworking since then to embed his principles intheir approach to regulation. This reviewprocess is designed to identify where aregulator is on the road to full implementationand the issues each needs to address tobecome Hampton-compliant.

The Review Team is grateful to the GamblingCommission (the Commission) for their supportand commitment over the Review period. Staffworking at every level in the Commission werevery open to the Review process. We are alsograteful for the contribution of theCommission’s stakeholders for their helpfulinsights into the nature of the industry and thewider context within which the Commissionoperates.

What we found

The Review Team concluded that theCommission is committed to implementing aregulatory regime that is consistent with theHampton principles. We found that in anumber of areas, however, the Commissioncurrently falls short of regulation in the spirit of the Hampton principles. We have maderelevant recommendations throughout thisReport: for instance, in relation to developing

1 Reducing administrative burdens: effective inspection and enforcement, Philip Hampton, HM Treasury, March 2005


2 Another factor that lie beyond the Commission’s control is the requirement for multiple, partially overlapping, licences for gamblingbusinesses: operational, premises, and personal licences.

associated with the Gambling Act 2005 whichare unpopular with parts of the industry but falloutside the Commission’s control. For instance,the introduction of a statutory requirement onthe gambling industry to pay licensing feeswhich fully reflect the costs of the regulatoryregime meant a very significant increase incosts for many of them2. The need to gatherintelligence on an industry that is diverse both inthe size of the businesses concerned and intheir different business models has also beenan issue. We believe that there is scope fordeveloping more effective engagement, andmany of our recommendations relate to betterengagement with regulated stakeholders inrelation to issues including risk, outcomes, anddata requests. There is a need for a clear“narrative” – communicating the Commission’sobjectives, processes, and thinking, in a waythat makes sense to the different elements inthe gambling sector. We believe that this will becritical in ensuring the long-term effectiveness ofthe Commission as a regulator.

The following list and table summarise ourspecific findings:

• The Commission is publicly committed toimplementing the principles of betterregulation.

• The Commission has developed good andextensive procedures for consultation andengagement with businesses, for the betterdesign of regulations.

• The Commission licensing staff showed astrong customer-focussed approach in theirday-to-day relationship with businesses.

• The Commission is developing a clearintelligence-based view of the most importantregulatory risks to the sector.

• The Commission is developing convincingplans to put risk assessment at the heart ofits work as a regulator.

• The Commission is committed to theproportionate use of sanctions, adopting anadvisory and supportive approach tobusinesses trying to be compliant.


more fully, measured against the some of thesymptoms 3 we were looking for to provideevidence of Hampton compliance.

Issues for follow-up

The following table sets out the key issues thatthe Review Team believes the Commissionneeds to address to meet the Hampton criteria

Issue to be addressed Hampton symptom

Improving the use of intelligence and risk-analysis

The Review Team found that there is a good grasp ofthe main strategic regulatory risks facing the sector(many of which come from outside the licensedcommunity). In general, decisions regarding theallocation of resources for enforcement in cases of non-compliance 3 followed from this assessment.

The Review Team was not convinced that resourceswere always allocated accordingly in some other casesincluding inspection activity and policy-making. Inparticular, stakeholders expressed some confusion asto the extent to which the Commission used riskassessment to set inspection plans.

The Commission will shortly be consulting on thedetails of a revised approach to the implementation oftheir risk-assessment framework. We strongly supporttheir commitment to reviewing their approach to risk:and believe that this is an opportunity to engage withstakeholders more effectively.

The Commission needs to continue to work to ensurethat its activities are prioritised according to risk, and tocommunicate what this will mean in practice forindividual operators.

• Regulators, and the regulatory systemas a whole, should usecomprehensive risk assessment toconcentrate resources on areas thatneed them most.

Better focus on outcomes

The Review Team was impressed by the extent to whichstaff within the Commission at all levels (and indeedthe Commission’s stakeholders) have a high awarenessof the statutory licensing objectives, especially giventhe short timescale.

Continued on next page

3 From Hampton Implementation Reviews: Guidance for Review Teams, National Audit Office and Better Regulation Executive, July 20084 The Commission’s Compliance Managers inspect and advise business on how to comply with the law; decisions as to formalenforcement action are referred by them to Gambling Commission headquarters.



Continued from previous page

However, the Review Team felt that there was confusionabout the wider outcomes associated with theseobjectives, and found a tendency to focus on outputmeasures in public statements of the Commission’sachievement (for instance, the number of licencesissued).

Greater clarity in defining and measuring the outcomesassociated with the objectives would help theCommission to, amongst other things:

– inform performance targets;– identify and understand trends in the gambling sector;– assess the impacts of its regulatory activity;– clarify those occasions where there might be a need

for the Commission to take additional action.

There are challenges here, but the Commission shouldwork to articulate the outcomes that it is seeking toeffect better. Quantification of long-term trends may notbe easy in the first instance, but the scope for usingindicative short-term data and measures should beexplored. Some suggestions for what might be done areset out in the relevant section of the Report below.

• The regulator has clear outcome-focused objectives and targets whichrelate to its statutory objectives /overall aim and which are understoodby its staff and stakeholders.

• The regulator uses a mix of outputand outcome measures, as well asshort-term and long-term measures.

The Commission could be clearer about itsresponsibilities with regard to the economic vitality of its regulated sector

The gambling sector, particularly through employmentand tax revenues, makes a significant contribution tothe UK economy.

The Review found some conflicting views within theCommission as to the extent to which it is responsiblefor setting a regulatory framework within which (otherthings being equal) members of the gambling industrycan operate effectively as businesses.

While some staff accepted this, other parts of theCommission appeared to the Review Team to be lesscomfortable with this role. We believe that this may bepartly due to perceived sensitivities regarding theethical issues associated with the gambling sector.

The Commission should work to embed a moreconsistent recognition of the ways in which its actionscan have an economic impact, and to improve theeconomic modelling of the likely impacts of regulationson the sector.

• Regulators should recognise that akey element of their activity will be toallow, or even encourage, economicprogress and only to intervene whenthere is a clear case for protection.

• The regulator undertakes robust cost-benefit analyses and impactassessments.



Providing clear, tailored guidance

We were impressed with the way in which theCommission’s staff work with individual businesses,particularly smaller businesses, to help explain theregulations. However, we found that some of thesmaller businesses we interviewed who had not haddirect contact with the Commission found some of itsrequirements daunting.

The Commission has done some work to communicateimaginatively in these cases – for instance, by textmessage – but needs to continue working on guidanceand approaches that meet the needs of harder-to-reachbusinesses.

• Advice and guidance are available in arange of formats and are easilyaccessible and accessed – high levelsof market-penetration are achieved.

Improving the quality of data requests, andcommunicating why they are required

Many stakeholders questioned the quantity of datarequested by the Commission.

The reasons for the data required in returns by theCommission are not well understood and this causes,in some cases, resentment and misunderstandingabout its work. We believe that the present lack ofunderstanding and consequent ill-feeling is a significanthurdle to an effective relationship with the regulatedsector.

We understand the case that much of this data isessential for the Commission to build its intelligenceregarding the sector; but the rationale for particularitems of data is not always clear.

We welcome the Commission’s commitment to reviewthe data requirements in 2010 (once two sets ofannual data returns have been made). We believe thatthis should be a systematic review of all the datarequirements, and that changes should beimplemented in good time for the 2010-11 datacollection cycle (ie. the fourth year of data collection).

The Commission should also take a targeted approachto explain the data returns that are required, both toCommission staff and to regulated businesses.

• The purpose of data collection is clearand understood by businesses andused when information is not availablefrom existing sources.

• Forms, data requests and record-keeping requirements are clear andtargeted and risk-assessment is usedto determine the level of informationrequired.



Working in partnership with local authorities

The Commission and local authorities are, in effect, co-regulators of gambling. The distinction between theirrespective licensing roles is not as clear as it might be:for instance, there is no ‘natural’ lead role in caseswhere a compliance issue is relevant to both apremises licence (issued by a local authority) and anoperational licence (issued by the Commission). Aconcordat with local authorities was agreed in 2007,but this area of work needs further attention.

Ideally, the Commission and local authorities should beable to work together as partners, with clarity as totheir respective roles. There are challenges givenoverlaps in the legislation, and the many other prioritiesthat local authorities have to address in practice.

The Review Team believes that the Commission shouldseek to work closely with local authorities to exchangepractical ideas through, for instance, secondments, toensure a better alignment between both parties’strategic interests.

• The regulator co-ordinates with otherregulators operating in the samesector.


Contents

Page no

Foreword 3

Summary and conclusions 4

Issues for follow up 6

Introduction 11

The Hampton vision 14

Design of regulations 17

Advice and guidance 19

Data requests 22

Inspections 25

Sanctions 28

Focus on outcomes 31

Appendix 1

Review Team membership 33

Appendix 2

Conclusions of the Hampton and Macrory reviews 34

Appendix 3

Review scope and methodology 36


5 The Commission was brought in to bring aunified approach to a previously disjointedregulatory regime and was set up to havewider and more flexible powers, withadditional responsibility for the regulation of remote gambling.

6 The Commission covers the whole of GreatBritain (England, Scotland and Wales), andalso has responsibility for remote gambling.However, remote operators only fall withinscope of the licensing regime if at leastone item of ‘remote gambling equipment’ is located in the UK. It has no control overoffshore remote gambling.

Resources 7 The Commission is a Non-Departmental

Public Body sponsored by the Departmentfor Culture, Media and Sport (DCMS). Itsregulatory operations, including the costsof enforcement against illegal gambling byunlicensed operators, are funded entirelythrough the fees it obtains throughlicensing and certification of the gamblingindustry, although some DCMS grant-in-aid(GIA) was paid to cover the Commission’sstart up costs and is now paid to supportsome of the Commission’s work relatingto research. The Commission’s financialperformance reflects the fact that it hasbeen in start up mode. The Commission’sannual report for 2007/08 shows incomefrom all sources of £11.57m with GIAfunding of £3.11m. Total expenditure forthe Commission was £16.7m in the sameperiod. However, this period coveredsignificant start up activity and the re-licensing of the industry. The newregulatory regime only came into operationin the second half of 2007/08. Estimatedtotal expenditure for 2008/09 is currently£15.7m.

Introduction

1 This review of the Commission aims toprovide a structured check on performanceagainst the principles 5 and characteristicsset out in the Hampton and Macroryreports (see Appendix 2) 6. The teamreviewed the Commission against aperformance framework 7 developed by theBetter Regulation Executive and the NAO,which provides a guide for reviewers on thekind of evidence to look for and questionsto consider. However, the process is notthe same in scope or depth as a full valuefor money audit of economy, efficiency andeffectiveness and the Review Team’sconclusions are based on a combination ofevidence and judgement. A brief descriptionof the scope of the review and methodsemployed is at Appendix 3.

2 The Commission was established by theGambling Act 2005. There are 10Commissioners who are appointed by theSecretary of State for Culture, Media andSport. The Commission is chaired by BrianPomeroy and the Chief Executive is JennyWilliams.

3 The Gambling Act integrated the regulationof various gambling sectors under theoversight of the Commission. The GamblingAct 2005 also gave local authorities a rolein licensing gambling premises.

4 The Commission was formally establishedin October 2005, and became fullyoperational on 01 September 2007. Priorto that, the Commission retained powersunder the 1968 Gaming Act, and carriedout regulatory activity under this Act butonly for the casino, bingo, society lotteriesand machine supplier sectors. The vastmajority of the operators it currentlyregulates only came under regulation by theCommission in September 2007.

5 Reducing administrative burdens: effective inspection and enforcement, Philip Hampton, HM Treasury, March 20056 Regulatory Justice: making sanctions effective, Final report, Professor Richard B Macrory, November 20067 Hampton Implementation Reviews: Guidance for Review Teams, National Audit Office and Better Regulation Executive, July 2008


8 At the peak of its workload preparing forthe implementation of the 2005 Act, theCommission employed a maximum of 300staff, although this has been reduced toaround 235 now that the majority of the re-licensing of the industry under the new Acthas been completed.

The Gambling Industry 9 The gambling industry had an estimated

turnover of over £84.2 billion in 2006/07.Gross gambling yield (i.e. the amountretained by operators after the payment ofwinnings but before the deduction of thecosts of the operation) was estimated tobe £9.9 billion in 2006/07. Estimatessuggest that, of this £9.9 billion, 25% wasgenerated by the National Lottery and mostof the remainder by those industries whichare regulated by the Commission. The UKgambling industry employed 96,000 peoplein 2003-4.

10 The gambling industry is highly fragmented.The Commission has issued licences tosome 3800 operators, 30 of which controlaround 80% of the industry; the vastmajority of the licensed operators are smalloperators. About 50% of licences are forsingle site operators.

11 The structure of the main industry sectorsdiffers:

Betting 12 In 2007/08 there were 579 on course and

801 off-course bookmakers licensed andan estimated 8,800 betting shops in theUK. Five operators account for 7,300betting shops. In 2006/07, off courseturnover was £36.6 billion and on courseturnover £864 million.

13 According to the Association of BritishBookmakers (ABB), c. 20% of adults in theUK place a bet at a betting shop each year.The vast majority of betting is on horse

racing, but increasing amounts are bet onother sports and on numbers events (e.g.the Irish lottery). The industry employs c.40,000 people.

Bingo14 In 2007/08 there were 675 bingo clubs in

the UK, Gala Bingo and Mecca Bingocontrol 43% of the industry by number ofclubs. The rest of the market is fragmentedbetween small and medium-sizedoperators.

15 The amount staked at bingo halls was£1.62 billion in 2007/08. The trend inrecent years has been downwards (£1.826billion and £1.82 billion in 2005/06 and2006/07 respectively).

Casinos16 In 2007/08 there were 144 casinos in

the UK and 1,156 casino personal licenceholders. The industry is dominated bythree companies, namely Gala, which has32 casinos, Grosvenor Casinos (Rank)which has 32 and Stanley Casinos/Stanley Leisure/Genting Internationalwhich has 46.

17 There were 16.2 million visits to casinos in2007/08, up 6.6% (1.1 million) on theprevious year. Total money staked was£4.4 billion, of which the total house winwas £656.5 million.

Gaming machines and arcades18 This sector of the industry consists of

gaming machine suppliers andmanufacturers, adult gaming centresand family entertainment centres. Thereare different types of machines,categorised based on the maximumstake and payout. Adult gaming centres,family entertainment centres (licensedand unlicensed), casino, betting, andbingo operators are entitled to offer aset number of gaming machines ofcertain categories, depending on theirpremises.


19 The Commission has issued some 336licences for family entertainment centresand 661 licences for adult gaming centresin the UK to 748 operators. There are fourmain operators, but most are part ofsmaller groups and, in many cases, theyare owner operated. Adult gaming centres(essentially amusement arcades) are morelikely to be found on high streets.

Lotteries20 Excluding the National Lottery, which is not

regulated by the Commission, there were atotal of 9,462 lotteries conducted in2007/08 by charities, sporting clubs,cultural bodies and others, in some casesusing commercial external lotterymanagers. These generated £170 million in ticket sales.

Remote gambling21 Remote gambling, including internet and

phone betting, were new additions to theregulatory regime. Offshore provision ofgambling is not however regulated by theCommission. Approximately 300 licenceshave been issued for remote gamblingactivities, although the majority are fortelephone betting, rather than for internetbased services.


benefits that arise from allocating resourcesto cases of most risk, taking action where itis likely to have the most beneficial effect,the proportionate allocation of resourcesaccording to risk can also send out animportant message to the regulatedcommunity. It can create an incentive forbusinesses to comply, reducing the risksassociated with their work.

We found:

• a strong commitment to develop a clearsense of the strategic risks posed bythe sector;

• that contradictory communicationsabout the way in which risk assessmentwill operate in practice have damagedthe credibility of the Commission’s workin some cases;

• enforcement resources (investigation)were allocated according to strategicrisks, but the link between riskassessment and the use of otherresources (notably the activities ofcompliance managers and policy-makers) are at this stage less clear.

27 The Commission is aware of these issues,and is working to put intelligence and riskassessment at the heart of its operations.We strongly support this work, and believethat the Commission should make clearcommunication of it plans to the industry a priority: both in general terms, as well asthe implications of the system for individualbusinesses.

28 The Commission acknowledges that somedifficulties in its early work here havedelayed the implementation of a fully risk-based system; we strongly support itscommitment to put this right, but recognise

The Hampton vision

23 Both the Hampton and Macrory reports areconcerned with effective regulation –achieving regulatory outcomes in a way thatminimises the burdens imposed onbusiness. Key to this is the notion thatregulators should be risk-based andproportionate in their decision-making,transparent and accountable for theiractions and should recognise their role inencouraging economic progress.

Risk-based

24 The work of the Commission, basedsquarely on the requirements of theGambling Act, deals with a number of keyrisks.

a the risk that gambling might be a sourceof crime and disorder, or be associatedwith it;

b the risk that children or other vulnerablepersons might be harmed or exploited togambling. (The risk posed by the damageto individuals and families by “problemgambling” 8 is particularly important here);and

c the risk of consumer detriment wheregambling is not conducted in a fair andopen way.

25 It is a regulator’s responsibility to make thebest use of the evidence available to it indetermining its work programme for thebetter protection of the public: the evidencerelating to these risks can be less stronghere than in other sectors, where thenature of the risks are more tangible (forinstance, where physical health is at risk),and where the relevant economic sectorsare better understood.

26 However, it is important to work withinthese constraints to allocate resourcesappropriately. As well as the immediate

8 Defined by the British Gambling Prevalence Survey as “… gambling to a degree that compromises, disrupts or damages family,personal or recreational pursuits”.


there will always be a need for review andimprovement in the light of developingexperience.

Transparency and Accountability

29 Stakeholders commented favourably on theextent to which the Commission consultson key points of policy (though there weresome complaints about the sheer volumeof material consulted upon in theCommission’s first 18 months), but theyexpressed doubts as to the extent to whichtheir views were taken on board, or at leasthad been reflected upon, in the formalresponses to consultation published by theCommission.

30 The Commission consults routinely andextensively on all its major proposals. Itactively seeks out stakeholders’ views onits proposals, and holds a number ofworkshops with them. Where stakeholders’views may conflict (and there are a numberof issues where sectoral views will befundamentally opposed), it consults withthem separately where appropriate. Anumber of stakeholders werecomplimentary about the methods used,and the extent to which particular membersof staff worked with them on key issues.

31 We found, nevertheless, a common feelingthat the Commission was not transparenton key decisions, nor the rationale for itsresponse on key issues following specificconsultations. Stakeholders believed thatthe Commission could do more to providedetailed feedback on its thinking beforeproceeding with the response. This in partreflects the sheer scale of consultationinvolved over the critical 18 months (as theCommission has worked to develop a newregulatory regime from scratch); and that,while the Commission has been able toconsult upon the detail of theimplementation of changes brought in by

the Gambling Act 2005, it has had limitedcontrol over their substance which reflectedprovisions in the Act.

32 We believe however that the Commissionshould explore means of making its internalprocedures more open. There are a range ofoptions here: for instance, the FoodStandards Agency holds Board meetings inpublic, and makes its proceedingsaccessible online in various formats. Thishas helped clarify its internal deliberationprocesses for stakeholders: helpingillustrate the extent to which issues raisedin consultation are considered at thehighest level within the organisation, evenwhere the Agency decides to stick to theapproach initially proposed. Clearly there aresome sensitivities where classified orotherwise confidential material is underdiscussion; in similar circumstances, otherregulators have used a combination of openand closed sessions, as well as redactedmaterial to deal with those cases wherecomplete openness might be inappropriate.

We found that:

• the Commission’s procedures and policyin relation to consultation are, ingeneral, strong;

• nevertheless, perceived failures incommunication between theCommission and its stakeholders couldbecome a significant obstacle to aneffective working partnership that isfounded on mutual understanding.

33 Again, the Commission is aware of theseissues, and we hope that forthcomingopportunities will be seized to improve itsdirect engagement with its stakeholdersnow that its operations – following theinitial requirement to develop a newregulatory framework and relicense theindustry – are entering a new “steady


state” of operation. Some specificrecommendations are made throughout this Report.

Economic progress

34 The Commission works in an area wherethe acceptable level of risk is contestedand debates are polarised. In thesecircumstances, the status of Hampton’srecommendations – all of which revolve insome sense around the application of risk– can sometimes be called into question.

35 DCMS’s funding agreement with theCommission for 2005-8 states that:“Gambling brings with it… inherent risks ofpersonal and social harm throughexcessive play. Research has revealed thatonly a small proportion of adults suffersignificant levels of harm, but it is theGovernment’s view that the reduction ofharm should take precedence over themaximisation of innovation, consumerchoice, and economic gain, whichrepresents its strategy in relation to leisureactivities that involve no such risks…”.

36 The Commission’s position is however nodifferent to that of any other regulator, all ofwhom have an obligation to seek to reduceharm, but must at the same time maintainan awareness of the needs of business andother stakeholders. No regulator can makean effective assessment of risk withoutsuch a calculation.

37 As is the case with many regulators, theCommission is subject to the statutoryduties to have regard to the Principles ofGood Regulation and the Regulator’sCompliance Code set out under theLegislative and Regulatory Reform Act2006. This recognises that regulators canhave a significant impact on the economicconditions under which regulatedbusinesses operate. This is recognised bythe statutory Code of Practice forRegulators (the “Regulators’ Compliance

Code”) which states that “Regulatorsshould recognise that a key element oftheir activity will be to allow, or evenencourage, economic progress and only tointervene where there is a case forprotection” 9.

38 It is for the Commission to take a lead inensuring a more sophisticated level ofdebate about regulatory risk in gambling:inevitably this will entail a recognition of theeconomic benefits that the sector canbring. This is inherent to any decision-making on the basis of cost-benefitanalysis. In some of our discussions withCommissioners and staff, however, it wasclear that the economic benefits of thesector were not understood, or wereunderestimated.

39 The Commission made it clear to us that itdoes not regard its role as one of“promoting or encouraging gambling” as ithas a specific statutory duty to permit itsubject to reasonable consistency with thelicensing objectives: the Review Teamagrees that this is clearly not its role.However, there needs to be a clearerrecognition of the ways in which its actionsas a regulator can have an economicimpact. We comment below, under “Designof Regulations”, on some of the relatedissues associated with impactassessment.

We found that:

• attitudes within the Commissionregarding its responsibilities in relationto economic progress were notconsistently understood;

• that the policy imperatives behind theprevention of problem gambling in somecases seemed to obscure anunderstanding of the economic benefitsresulting from the sector’s work (forinstance, in providing employment).

9 Regulators’ Compliance Code: Statutory Code of Practice for Regulators, BERR, 2007, p.11.


Design of regulations

Key findings

• While the Commission generally conducts impact assessment, the quantification of costs andbenefits using all available sources could be significantly improved.

• The Commission seeks to take a principles-based approach to regulations; but this means thatthe regulations can, in practice, be over interpreted by compliance managers.

Hampton principles

“All regulations should be written so that they are easily understood, easily implemented,and easily enforced, and all parties should be consulted when they are being drafted”

“When new policies are being developed, explicit consideration should be given to howthey can be enforced using existing systems and data to minimise the administrativeburden imposed”

Background

40 The Commission takes many of itsregulatory responsibilities directly fromthe Gambling Act 2005. This is primarylegislation, and the Commission has nodiscretion over its application. It advisesthe Secretary of State for Culture Mediaand Sport about, but does not itselfimpose, regulations through secondarylegislation under the Act. TheCommission is responsible for theLicensing Conditions and Codes ofPractice with which licence-holders mustcomply. The Commission also has a rolein interpreting the practical application ofthe Act for local authorities, under itsstatutory power to give guidance to whichlicensing authorities must have regard.

Review Findings

While the Commission generallyconducts impact assessment, thequantification of costs and benefitsusing all available sources couldbe significantly improved

41 The Commission has conducted a largenumber of consultations since its creation.Generally speaking, Impact Assessments(IAs) accompany these, but the costs andbenefits associated with them are notalways quantified. There have beendifficulties in the early stages, given thelack of data on some of the sectorsinvolved; however, we hope that theCommission’s increasing evidence basewill now be put to use as a basis forthorough economic modelling of the impactof its proposals.

42 In addition to the use of data fromregulatory returns, the Commission has anumber of options open to it: we believethat in-depth work with specific businesses,


the use of existing research and opensources, and (where necessary), makinguse of explicit assumptions as a basis formodelling and consulting upon them, couldall help provide a good basis for effectiveand transparent impact assessment.

The Commission seeks to take aprinciples-based approach toregulations; but this means thatregulations can, in practice, beover interpreted by compliancemanagers

43 The Commission seeks to take a principles-based approach to the licence conditions.For instance, they specify that licenseesmust make information readily available totheir customers on how to gambleresponsibly, but does not specify the exactform the way that it should be madeavailable. This allows for a flexibleinterpretation of the law to suit differentbusinesses’ conditions and needs.

44 A number of stakeholders suggested to theReview Team that the meaning of theconditions were being over-interpreted bycompliance managers in practice, in a waythat could also make for inconsistency inthe application of the law. For instance,information on problem gambling iscommonly made available in toilets, in away that allows customers to pick upleaflets (that they may not wish to be seenconsulting) in private. There is norequirement to do so; but issues like this,and the display of posters, appears to havebeen interpreted rigidly in some casesdespite the flexibility of the underlyingstatutory requirements; we recognise thatthe Commission is aware of this issue,however, and has plans to deal with it.


Advice and guidance

Key findings

• The Commission has given good tailored advice to prospective licensees through its adviceline; and the sense of customer service to licensees across the organisation is strong.

• There have however been occasions where the Commission has not been able to giveguidance on key regulatory issues in as timely a way as stakeholders would have liked.

• More could be done to tailor communications of advice to individual sectors, and in particularto smaller operators without dedicated compliance staff.

• The nature of the Commission’s relationship with local authorities is not clear.

Hampton principle

“Regulators should provide authoritative, accessible advice easily and cheaply.”

Background

45 The Commission gives advice andguidance to businesses and to regulatorypartners by a number of means, forinstance:

• through the publication of statutorydocuments specifying the generalrequirements on licensees, such as the Licence Conditions and Codesof Practice (LCCP);

• through guidance accompanying licensing forms;

• through face to face advice oncompliance visits;

• through statutory guidance to localauthorities regarding their responsibilitiesunder the Gambling Act;

• by email and telephone through theCommission’s Enquiry Unit.

Review Findings

The Commission has given goodtailored advice to prospectivelicensees through its advice line;and the sense of customer serviceto licensees across theorganisation is strong

46 The Review Team was particularlyimpressed with the work of licensing andenquiry staff who had supportedbusinesses in working through thepaperwork required for the implementationof the new Act. Staff had a clearunderstanding of what would constitute aproportionate requirement (for instance,what smaller businesses would need tosubmit in order to meet the requirementsfor the submission of business informationwhich was part of the licensing process).The Commission have also given specifichelp to licensees on form-filling over thephone or in some cases, face-to-face attheir offices.


Good Practice – work of theGambling Commission Licensing TeamThe Commission recognised that theintroduction of the new regulatory regimewould be challenging for many smalloperators and that those operatorswould need support in completingapplications and understanding the newarrangements.

A dedicated Enquiries Team wasestablished to support this. Workingclosely with the Licensing Team, advicewas provided to operators, includingworking with operators to completeapplications, responses were developedto frequently asked questions andcommon problems with theCommission’s processes were identified.

A ‘continuous improvement’ approachwas developed, with lessons being fedback into an internal review group. Thisallowed the Commission to adapt itsprocesses, including simplification of theapplication forms and processes.

47 A strong spirit of customer serviceunderpins this part of the Commission’soperation, and this has resulted in a seriesof continuous improvements which have,for instance, been used to improve thequality of forms and material in “FrequentlyAsked Questions” section of theCommission website.

48 Contact details for the Enquiry Team areclearly displayed on the Commission’swebsite and the Frequently AskedQuestions are helpfully presented bysector. Some stakeholders thought that thewebsite could be better organised, but weunderstand that the Commission is workingto improve it.

49 The Commission has explored innovativeapproaches to reaching the smaller end ofthe industry, such as text messageupdates. We commend this approach andurge efforts on this to continue.

There have however beenoccasions where the Commissionhas not been able to give guidanceon key regulatory issues in astimely a way as stakeholderswould have liked

50 Stakeholders were concerned, irrespectiveof this, that the Commission had failed togive timely guidance in some keyinterpretation and operational areas over itsfirst year of operation. The Commission isaware of these concerns, however, and werecognise that plans are in hand to ensurethat advice is given promptly as issuesbecome topical, as revealed through day-to-day compliance work or that of the EnquiriesTeam. To take one example, theCommission has responded quickly toemerging issues relating to cases whereprivate houses are offered as prizes inlotteries, owing to pressures with thehousing market.

More could be done to tailorcommunications of advice toindividual sectors, and in particularto smaller operators withoutdedicated compliance staff

51 Some of the material issued by theCommission can be daunting to smallerbusinesses. For instance, the formregarding applications for operating licencesis lengthy, and requires detailed financialinformation to determine the extent to whichthe business is able to support the financialrisks that are inevitable in gambling. Manyof the stakeholders that we spoke toquestioned the need for this information,particularly in the case of smaller firms who


may not be able to provide the analysisrequired to generate the data withoutoutside help. The Review Team found thatCommission staff offered good advice tobusinesses, talking them through thoseparts of the form which are relevant tothem, and supporting them through theprocess of completion (including, forinstance, telling them the minimuminformation that would be requiredaccording to the size of the business).Some of these messages however had notreached some of the operators that wespoke to, and we believe the Commissioncould provide more tailored plain Englishguidance on the completion of forms, whichcould be usefully broken down by sector, onits website. The Commission has alreadycarried out one review of the forms,surveying a sample of users and making anumber of changes, but we also believethat, once the licensing system is moreestablished, the forms should be given amore systematic review to establishwhether business is still experiencingproblems with them in practice.

The nature of the Commission’srelationship with local authoritiesis not clear

52 Gambling is effectively co-regulated by theCommission and by local authorities. TheGambling Act 2005 confers a duty on theCommission to issue operating andpersonal licences; local authorities musthowever license the specific premiseswithin which gambling takes place.

53 The respective roles of the Commission andlocal authorities are not totally clear,particularly on a operational day-to-daybasis, despite the attempt to clarify this viaa concordat agreed with LACORS (the LocalAuthority Co-ordinators of RegulatoryServices) in October 2007. (This is partly aresult of the legislation itself (whichrequires parallel licensing processes) butthe Review Team believes that theCommission could do more to set astrategic lead for local authorities. Gamblinglicensing, in general, represents a smallvolume of work for licensing departments inlocal authorities, and there is a realchallenge for the Commission here.

54 While local authorities have productiverelationships in their day-to-day work withthe Commission’s regional compliancemanagers, communication at a higher levelin the organisation is not effective. TheReview Team believes that recent work bythe Health and Safety Executive (HSE)might be a good model for further work bythe Commission: this has entailed, forinstance, secondments of staff between the HSE and local authorities, in a way thathas resulted in a increased sense ofpartnership based on strongerunderstanding, and better alignment of both parties’ strategic interests.


Data requests

Key findings

• The scale of the Commission’s data requirements is a significant source of complaint for itsstakeholders

• The forms required for data returns are, in general, well constructed; but the rationale forsome of the requirements is not explained clearly enough.

• The reasons for data collection in some cases is not clear; with better information andintelligence on the sector, the need for these returns may be able to be reviewed andreduced.

• The need for quarterly data returns for local authorities should be reviewed.

Hampton principle

“Businesses should not have to give unnecessary information or give the same piece ofinformation twice.”

Background

55 Data, when it is effectively used, caninform a strategic, intelligence-led,approach to regulation. Regulators need tomake sure, however, that the collection ofdata does not impose unnecessary costson compliant businesses.

56 The Commission collects data both toinform its work as a regulator (as a sourceof intelligence and to contribute to its riskassessment process) but also as part ofits duty under the Gambling Act to advisethe Secretary of State about certainmatters relating to gambling. TheCommission imposes three main datarequirements on business and its partners.It requires:

a data for licence applications (includingfor instance data on the financialposition of the prospective licensee);

b data in the form of annual or quarterlyregulatory returns to be submitted bylicensees (including information onmatters like staff turnover); and

c quarterly data returns from localauthorities (regarding enforcementaction, such as inspections and reviewsof licences).

57 In parallel, businesses seeking a premiseslicence must submit data to the relevantlocal authority as part of their applicationto operate under the regime.


Review Findings

The scale of the Commission’sdata requirements is a significantsource of complaint for itsstakeholders

58 A wide range of stakeholders (frombusiness and elsewhere) questioned theway in which the Commission collects data.In particular, doubts were raised about:

a the quantity of the data required,

b the ‘personal’, or confidential, characterof some of the information, and

c about whether particular items ofinformation were meaningful, or indeedused.

59 The Review Team’s work coincided with thedeadline for the first round of datasubmissions by some operators, and itfound that in the circumstances asignificant amount of compliance staff timewas given over to explaining data returnforms, and in chasing the provision ofspecific data requests, rather than pursuingcompliance in wider terms. We found thatthe data collection regime currently poses asignificant obstacle to stakeholders buyingin to the regulatory regime: like licensingfees, the need to provide regulatory datahas been a new experience for many of theregulated businesses concerned, and thishas inevitably complicated theCommission’s work here.

The forms required for data returnsare, in general, well constructed;but the rationale for some of therequirements is not explainedclearly enough

60 Licensing forms can appear daunting, butare well constructed. They are designed tofit the circumstances of a wide range ofsectors, and are therefore relatively long:

with clear guidance, however, they arerelatively straightforward to complete. Their design has been improved over timefollowing consultation with the industry.

61 The Review Team accepts the need forcertain personal financial information to beprovided as part of the licensing process.This is important in establishing the viabilityof the enterprise; in particular, whether aprospective licensee has the financialcapacity to cover the risks that are inherentin the business.

62 However, the usefulness of other elementsof the data returns were less clearlyexplained. Commission staff were, onoccasion, unable to explain the reason forspecific data requests, or did so in a waythat could be confusing for businesses. Inone case, for instance, we found that front-line staff had effectively placed anadditional burden on businesses by askingthem to record personal details ofindividuals whose age had been checkedon entry to a licensed premises, despitethe fact that no such information is actuallyrequired by the Commission. Where data isnecessary, a more considered and activeapproach should be taken to raising staffawareness and explaining the rationale fordata collection – generally and specifically –to business.

The reasons for data collection insome cases is not clear; withbetter information and intelligenceon the sector, the need for thesereturns may be able to bereviewed and reduced

63 The Commission accepts the need toreview its data collection on a rolling basis,and argues that increasingly strong grasp ofthe risks involved in the sector will allow fora review as to whether aspects of thereturns are necessary.


64 The Review Team strongly supports itsproposals here, and would encourage theCommission to clarify its thinking to thosewho are on the receiving end of the datarequests. This communication should alsomake the Commission’s commitment toproportionality of data requests, and theirpossible costs, clear.

65 The Commission should also explorealternatives to data collection as a sourceof meaningful intelligence on compliance:surveys or complaints data might forinstance become more useful andmeaningful in practice than routine datareturns.

66 In the Impact Assessment accompanyingits January 2008 publication on RegulatoryReturns, the Commission announced itsplans to review data requirements in 2010(once two sets of annual data returns havebeen made). We believe that there shouldbe a systematic review of all the datarequirements at that point, and thatchanges should be implemented in goodtime for the 2010-11 data collection cycle(ie. the fourth year of data collection).

67 The Commission also collects data insupport of its role as adviser to the

Secretary of State. There are risks that thiscould work against the Hampton vision thatdata should only be collected in cases ofclear regulatory need and the Commissionshould work to ensure that that thecollection burden is reduced as far aspossible.

The need for quarterly data returnsfor local authorities should bereviewed

68 Local authorities are required to submitquarterly returns to the Commission ontheir activities under the Gambling Act2005. Returns include information on (forexample) number of inspections, number oflicence reviews, and number of otherenforcement activities. A quarterly returnappears to be excessive: local authoritiesare already required to report individualcases of some of these activities to theCommission as and when they arise, andsome of the data is hard to make sense ofout of context: for instance an “inspection”can mean activity taken in response to aspecific complaint, or could be part of arandom programme of visits. As part of itswork on partnership with local authorities,the Review Team believes that theserequirements should be reviewed.


Inspections

Key findings

• The Commission’s inspection strategy is not yet mature; its initial focus has been on buildingrelationships with new licensees, and with bringing harder-to-reach operators into compliance.

• The Commission intends to implement a fully risk-based approach to inspection, and the ReviewTeam support this.

• Some regulated businesses are confused as to the Commission’s inspection policy and itscurrent relation to risk.

Hampton principle

“No inspection should take place without a reason.”

Background69 The Gambling Act 2005 has fundamentally

changed the inspection regime for mostsectors. Under the predecessor legislation,casinos were subject to regular monthlyinspections; meanwhile remote gaming wasillegal and bookmakers and arcades werenot subject to inspection under thegambling legislation at all.

70 The transition from the Gaming Board tothe Commission with new sectors and anew Act has had implications for staffingthat have posed challenges in terms ofknowledge capture and transfer; theCommission acknowledges the problemsthis has initially created in some areas interms of developing expertise. Many of thebusinesses that the Review Team spoke towere sympathetic to the position of theCommission, and some indeed expressedtheir interest in helping familiarise newstaff with the nature of the businessesinvolved.

71 In 2007/08 the Commission undertook:

• Corporate inspection visits - six to majorcasino operators, six to bingo operators,11 to major betting companies and fourto lottery operators.

• Compliance visits – 641 compliancevisits to casinos, 531 to bingo clubs,769 to betting shops and 652 to adultgaming centres, family entertainmentcentres and machine suppliers.


Review Findings

The Commission’s inspectionstrategy is not yet mature; its initialfocus has been on buildingrelationships with new licensees,and with bringing harder-to-reachoperators into compliance

72 The Commission’s inspection strategy is notyet mature: priority since 2007 has beengiven, through the work of the Commission’scompliance managers, to raising awarenessof, and thereby compliance with, the newlegislation. Businesses will however belooking to the Commission to put its morerisk-based inspection plans into operationas soon as possible.

73 The focus has so far been on those partsof the sector which were new to the

Commission, notably bookmakers andarcades. Many of the stakeholders that wespoke to complimented the “coaching”approach that inspectors had taken inpractice, offering tailored explanations ofthe meaning of the gambling regulations forthem. There is a commitment to thisapproach throughout the Commission;however (as with any regulator, especially aregulator implementing new and unfamiliarlegislation) the quality and consistency ofadvice can differ in practice.

The Commission intends toimplement a fully risk-basedapproach to inspection, and theReview Team support this

74 The Commission’s approach to riskassessment and inspection is set out in itspublication, The Compliance Process, the

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Risk Modelling System and the Annual VisitProgramme (August 2007).10 This sets outthe Commission’s vision, which is entirelyconsistent with the Hampton principles,that a strong record of compliance shouldresult in “earned autonomy” for theoperator – a presumption that, all otherthings being equal, less external scrutiny isneeded than in other cases, meaning areduced burden of inspection for compliantbusinesses.

75 One year on, this model has yet to takeeffect; this in part reflects the complexitiesof assessing risk in practice, particularly inthe context of a new licensing regime. TheCommission remains committed to thisvision however, and we strongly support itsplans to bring more detailed plans forwardin the near future for consultation.

Some regulated businesses areconfused as to the Commission’sinspection policy and its currentrelation to risk

76 In the absence of a fully worked up riskmanagement system, the messages toindividual businesses as to what they canexpect in terms of inspection under the risksystem have not been clear in all cases.

77 More could be done to clarify what theCommission’s developing thinking willmean for individual businesses (inparticular, in terms of the levels ofinspections that can be expected) when ittakes full effect – though inevitably this willchange over time in the light of experience.

10 Available at: http://www.gamblingcommission.gov.uk/Client/mediadetail.asp?mediaid=217

Sanctions

Key findings

• There is a commitment throughout the organisation to balancing the effective use ofsanctions in serious cases with a presumption that persuasion and advice are the mosteffective means of creating compliance.

• The Commission’s internal controls on the use of enforcement action have been cumbersome,but a more streamlined decision-making process is being introduced.

• The Commission is restricted to prosecution when taking action against those who do nothold licences; and there is a case for reviewing whether sanctioning powers under Part 3 ofthe Regulatory Enforcement and Sanctions Act might be adopted for these cases.

• Stakeholders want to see the Commission act vigorously where operators deliberately workoutside the law.

Hampton & Macrory principles

“The few businesses that persistently break regulations should be identified quickly, andface proportionate and meaningful sanctions.”

“Regulators should be transparent in the way in which they apply and determineadministrative penalties.”

“Regulators should avoid perverse incentives that might influence the choice of sanctioningresponse.”

“Regulators should follow-up enforcement actions where appropriate.”

Background

78 The Gambling Act 2005 has conferred onthe Commission a flexible range ofsanctions. The Commission’s regulatoryregime is founded on the use of licences,both operational (for particularorganisations) and personal (for staff withcertain responsibilities withinorganisations). Licences can be reviewedwith a range of possible outcomes,depending on the severity of the case:

• warnings about specific forms of non-compliance can be issued;

• licences can be suspended;

• new conditions can be attached to thelicence; or

• licences can be removed.

79 Additionally, financial penalties(theoretically unlimited) can be imposedfor breaches of licence conditions. Thoseoperating without a licence, or committinga range of other related offences, may beprosecuted.



80 There were 1564 complaints againstoperators between 1 September 2007and 31 January 2009. Many of these arehandled at the point of first contactbecause they are either in respect ofremote operators not licensed by theCommission or because the complainanthas not used the operators’ complaintsprocedure. In 81 of cases, the matter wassufficiently important to be referred on tothe enforcement team. Actions taken bythe Commission were:

• 30 certificates issued under previouslegislation and 1 personal licence revoked

• 47 criminal investigations

• 31 investigations referred to RegulatoryPanel

• 3 operator’s licences suspended; onelater reviewed and down scaled toconditions being put on the licence.

Review Findings

There is a commitment throughoutthe organisation to balancing theeffective use of sanctions inserious cases with a presumptionthat persuasion and advice are themost effective means of creatingcompliance

81 In general, businesses are eager to complywith the law. The Compliance Code forRegulators states that, where a businessasks for advice from a regulator, then theregulator should be able to provide thatadvice and the request (which is evidenceof the business’s good faith in seeking tocomply with the law) should not itselftrigger an enforcement action.

82 The Review found that this approach wasclearly understood and implementedthroughout the organisation; with strictcontrols on the use of enforcement activity.

The Commission’s internal controlson the use of enforcement actionhave been cumbersome, but amore streamlined decision-makingprocess is being introduced

83 The Commission however deals with a widerange of offences which vary from cases ofindividual wrong-doing (for instance, dealingwith personal licence holders who havecheated in the course of their duties) tomore serious cases, like the systematicoperation of illegal gambling facilities byorganised crime.

84 There were unusually strict controls onthe application of enforcement actionswithin the Commission however, in theearly stages, with decisions to takeenforcement action beyond the level of awarning letter being referred to aCommissioner-level Regulatory Panel. Wewelcome the fact that a range ofdecisions have now been delegated tostaff with tiered sign- off, reflecting thepractice in relation to licence applicationdecisions; this ought to be kept underreview, perhaps including somebenchmarking with other regulators, andthe case for any further delegationconsidered in the future.

The Commission is restricted toprosecution when taking actionagainst those who do not holdlicences; and there is a case forreviewing whether sanctioningpowers under Part 3 of theRegulatory Enforcement andSanctions Act might be adoptedfor these cases

85 While the Commission has considerableflexibility in the range of sanctions at its disposal where it is taking actionagainst a licence-holder, it is limited to prosecution in cases where a licence isnot held.


86 In these cases, the Review Team foundthat some of the sanctions that areprovided in the Regulatory Enforcementand Sanctions Act 2008 – notably Fixedand Variable Monetary Penalties andEnforcement Undertakings – could givegreater flexibility and effectiveness to theCommission’s enforcement toolkit.

Stakeholders want to see theCommission act vigorously whereoperators deliberately workoutside the law

87 A number of stakeholders expressed aview that the Commission was allocatinginsufficient resources to enforcementwhere individuals are deliberately floutingthe law; for instance, where they areproviding gambling facilities without alicence.

88 While we were persuaded that theCommission has a strong grasp of themost serious regulatory risks confronting itin practice (including those which come

from outside the licensed sector, notablywith the provision on unlicensed gamblingmachines), and that enforcement activitywas being prioritised accordingly, morecould be done to tie the allocation ofenforcement resources moresystematically to the Commission’semerging risk model. For instance, someof the greatest regulatory risks facing theindustry come from those who are outsidethe licensing system; there is as yet noclear way of showing how action directedat those deliberately operating outside thelaw is prioritised in relation to routineactivity with the compliant majority oflicensed businesses.

89 On a related point, the Review Teamthought that Commission had notpublicised the extent of its enforcementactivity as fully as it might. We believesuch publicity will be important in givingreassurance to compliant stakeholdersabout the way that it is prioritising itswork.


Focus on Outcomes

Key findings

• An understanding of the licensing objectives underpinning the regulatory regime for gambling isthoroughly embedded in the organisation and the industry.

• The Commission has yet to convert the licensing objectives into measurable outcomes, anddevelop metrics to assess progress against these.

• There are particular sensitivities around outcomes associated with “problem gambling”; but theCommission should work to tackle these openly.

Hampton principle

“Regulators should measure outcomes and not just outputs.”

Background

The Licensing Objectives:

“(a) preventing gambling from being a source of crime or disorder, being associated with crime or disorder or being used to support crime;

(b) ensuring that gambling is conducted in a fair and open way; and

(c) protecting children and other vulnerable persons from being harmed or exploited by gambling.”

Section 1, Gambling Act 2005

91 The Review Team was impressed with theextent to which these objectives arerecognised throughout the Commission,and by external stakeholders, includingrelatively junior staff working for licensees.

92 This level of recognition of the intentionsbehind regulation is impressive (particularlyin the light of the relatively short period oftime in which the Commission has beenoperating) and reflects the Commission’ssuccess in communicating and promotingan understanding of the regulatory regimeover its first year of operation.

The Commission has yet to convertthe licensing objectives intomeasurable outcomes, anddevelop metrics to assessprogress against these

93 The objectives do not in themselveshowever fully convey the outcomes that thework of the Commission and its partners isintended to secure: for instance, onemeasurable outcome of the secondlicensing objective would be the extent towhich customers are confident of theirability to place a fair bet. We found thatCommission staff – while they clearlyunderstood the objectives – took an

Review Findings

An understanding of the licensingobjectives underpinning theregulatory regime for gambling isthoroughly embedded in theorganisation and the industry

90 The Gambling Act 2005 gives theCommission has a statutory responsibilityto (a) pursue and have regard to thelicensing objectives, and (b) to permitgambling, in so far as the Commissionthinks it is consistent with those principles.


inconsistent view of the outcomes that theyare trying to achieve. Reporting on theachievements of the Commission in its firstyear of operation (for instance, in theCommission’s Annual Report) has focusedon output measures, like the number ofcompliance visits, and (reflecting the mostimportant task before the Commission atthat point) the number of licences granted.

94 Regulators commonly find it difficult toidentify quantifiable measures that directlyreflect their particular impact on ameaningful social outcome. This reflects thecomplexity of causation. For instance, theprevalence at any particular time of“problem gambling” may reflect a number offactors that lie wholly outside theCommission’s control.

95 Outcome measures need not be used asindicators of the Commission’sperformance, but they would be helpful inclarifying wider trends affecting its workand in bringing issues where there is aneed for the Commission to take action toits attention. More could be done toarticulate the outcomes that theCommission (with its many partners) isseeking to achieve, and to explorepossible proxy measures and indicativedata which might be used in the absenceof a completely satisfactory measure.

96 A good example in this instance would bethe Financial Services Authority’sOutcomes Performance Report (OPR),which has been developed to provide asingle repository of performanceinformation about how well the FSA ismeeting its statutory objectives. The OPRreport has value not only in trackingperformance, it also can be used as amanagement tool which can be used todisseminate priorities and messages to staff.

There are particular sensitivitiesaround outcomes associated with “problem gambling”; but theCommission should work to tackle these openly

97 The Review Team discussed the outcomesassociated with “problem gambling” withstaff of the Commission and externalstakeholders. The scale of problemgambling is hard to determine, given thehidden character of the condition. The mostimportant recent study 11 found that the rateof problem gambling in the adult populationin 2007 was about 0.6% (about 284,000adults). This is the same percentage of thepopulation as identified in an earlier surveypublished in 1999. Other sources ofinformation on its scale and causes – for instance, levels of self-exclusion, andresearch on the impact of gamblingmachines in other jurisdictions wheregambling has been liberalised (notably inAustralia) – are available and have beenused by the Commission; it is importantthat all available sources should be used to create a more informed framework forregulatory decision-making.

98 One of the difficulties facing theCommission is the presentational difficultyassociated with being seen to advocate anacceptable level of problem gambling if atarget were set; however we believe thatthere are comparable issues in otherregulatory sectors where acceptable levelsof risk are at issue. An attempt todetermine what the appropriate outcomeshould be – which would need to addressthe appropriate balance between regulationand individual responsibility – is aprerequisite of a mature debate onregulation in the sector. A measure relatingto a trend in problem gambling (whichmight include a target for year on yearreduction in problem gambling relative tothe volume of gambling activity in general),might be one way of addressing the issue.

11 2007 British Gambling Prevalence Study www.gamblingcommission.gov.uk/UploadDocs/publications/Document/Prevalence%20Survey%20final.pdf


Appendix 1: Review Team membership

Andy Drane is the Deputy Chief Executive andDirector of Operations of the Security IndustryAuthority and has been with the organisationsince its creation in 2003. Prior to joining theSIA, Andy enjoyed a 30-year police career in theEssex and Avon & Somerset police services,achieving the rank of Assistant Chief Constable.

Hugh McNeal has worked in academia, HMTreasury and the Better Regulation Executive.He is currently Director of the Low CarbonBusiness Opportunities Unit in BERR.

Ian Peters was until recently Director ofExternal Affairs and Marketing at EEF, the UKmanufacturing employers’ organisation. He iscurrently providing consultancy to BERR onaspects of its manufacturing strategy. Ian was amember of the Government’s Better RegulationTask Force from 2000-2007 and has previouslyworked on business policy for the BritishChambers of Commerce (BCC) and the CBIwhere he was head of the Small and MediumEnterprise Unit.

Chris Shapcott is a Director in the NationalAudit Office, where he is responsible for leadingexaminations of the economy, efficiency andeffectiveness with which government bodieshave used their resources. He currently leadsthe NAO team responsible for examinations ofconsumer affairs, regulation and regulatoryreform. In recent years he has been responsiblefor National Audit Office examinations ofeconomy, efficiency and effectiveness in severaldifferent areas, including the National HealthService, PFI, environment, transport andagriculture.


Appendix 2: Key findings and conclusions of the Hampton andMacrory reports

• Regulators, and the regulatory system as awhole, should use comprehensive riskassessment to concentrate resources on theareas that need them most

• No inspection should take place without areason

• Regulators should provide authoritative,accessible advice easily and cheaply

• All regulations should be written so that theyare easily understood, easily implemented,and easily enforced, and all interestedparties should be consulted when they arebeing drafted

• Businesses should not have to giveunnecessary information, nor give the samepiece of information twice

• The few businesses that persistently breakregulations should be identified quickly, andface proportionate and meaningful sanctions

• Regulators should recognise that a keyelement of their activity will be to allow, oreven encourage, economic progress and onlyto intervene when there is a clear case forprotection

• Regulators should be accountable for theefficiency and effectiveness of their activities,while remaining independent in the decisionsthey take

• Regulators should be of the right size andscope, and no new regulator should becreated where an existing one can do thework

• When new policies are being developed,explicit consideration should be given to howthey can be enforced using existing systemsand data to minimise the administrativeburden imposed

Source: Hampton Report, Box E2 page 7

Hampton principles of inspection and enforcement


A sanction should:

1. Aim to change the behaviour of the offender;

2. Aim to eliminate any financial gain or benefit from non-compliance;

3. Be responsive and consider what isappropriate for the particular offender andregulatory issue, which can includepunishment and the public stigma thatshould be associated with a criminalconviction;

4. Be proportionate to the nature of the offenceand the harm caused;

5. Aim to restore the harm caused by regulatorynon-compliance, where appropriate; and

6. Aim to deter future non-compliance.

Regulators should:

1. Publish an enforcement policy;

2. Measure outcomes not just outputs;

3. Justify their choice of enforcement actionsyear on year to stakeholders, Ministers and Parliament;

4. Follow up enforcement actions whereappropriate;

5. Enforce in a transparent manner;

6. Be transparent in the way in which they applyand determine administrative penalties; and

7. Avoid perverse incentives that might influencethe choice of sanctioning response.

Source: Macrory Report, Box E1 page 10

Macrory’s principles and characteristics of an appropriatesanctioning regime


Appendix 3: Review scope and methodology

The review focused on those aspects of theCommission’s activities where we consideredthat its actions have the most impact onbusiness. This meant that the majority of theCommission’s work was in scope

Our methods included:

• interviews with a wide range of Commissionstaff including senior managers;

• interviews with other stakeholders includingthe trade bodies in the gambling sector andbusiness representative groups;

• focus groups of Commission policy staff andenquiry staff

• observational visits including inspections; and

• document review, including the Commission’shigh level strategies and plans.

The review process is described in HamptonImplementation Reviews: Guidance for ReviewTeams. It is not the same as a full value-for-money audit of economy, efficiency andeffectiveness and the Review Team’sconclusions are both evidence- and judgement-based. These judgements, however, have beenmade drawing on a range of evidence fromdifferent sources, including those describedabove. Judgements have not been based onevidence from a single source – the ReviewTeam has sought to bring together evidencefrom a number of different businesses ororganisations, and from Commission front-linestaff, policy officials and senior managers.





Better Regulation ExecutiveDepartment for Business, Enterprise and Regulatory Reform3rd Floor1 Victoria StreetLondon SW1H 0ET

Website: www.berr.gov.uk/bre

Publication date: April 2009

URN: 09/823

© Crown copyright 2009

The text in this document may be reproduced free of charge in any format or media withoutrequiring specific permission. This is subject to material not being used in a derogatorymanner or in a misleading context. The source of the material must be acknowledged asCrown copyright and the title of the document must be included when being reproduced aspart of another publication or service.

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Gambling Commission: A Hampton Implementation Review Report€¦ · Gambling Commission: A Hampton Implementation Review Report 5 2 A noth e rf ac libyd C ms’ q u p ,v g businesses: