Under the Gambling Act 2005, the Secretary of State for Culture, Media and Sport was given the role of make regulations regarding the setting of fees that should be paid by operators requiring personal and operating licenses to the Gambling Commission. The amount due to be paid is set in line with the guidance and rules of the HM Treasury at a level which allows the Gambling Commission to recoup the cost of delivering their responsibility whilst still ensuring value for money and fairness within the industry. The Commission and the Government have now taken part in a joint consultation and have put forward their proposals for ensuring that the costs incurred by the Commission can still be recovered from the various sizes and types of gambling operators across all of the various regulated sectors. These proposals are designed to reduce the burden of fees overall across the gambling industry, to remove any potential barrier to operators keen to enter the gambling market and to reduce the costs of administration in cases where the operators’ businesses continue to grow.
The Background to the Review
This review has taken place after the Gambling Commission’s regulatory remit has undergone a change as a result of the 2014 Act which was brought in during November 2014. This Act changed remote gambling regulation to a “point of consumption” basis instead of “point of supply”, meaning that all operators that transact with consumers within the UK have to get a licence from the Gambling Commission, even if they are not based in Great Britain. The result of this was a large increase in the amount of gambling (from £6.7 billion to £9.3 billion) to be regulated by the Gambling Commission, and therefore a fee review has become necessary. A fees discussion paper was published to this end in September 2015, explaining the Commission’s thinking and approach to improving the fee structure, and discussions were subsequently held with stakeholders in the gambling industry. The responses received during this exercise have been taken into account in the proposals that have now been issued to the Government. It is expected that the proposed changes will be brought about on 6th April 2017, although the fees regulations are subject to the Parliament’s negative resolution procedure.
The Gambling Commission’s Role
Almost all gambling in the UK is regulated by the Gambling Commission under the terms of the 2005 Act, including gambling which takes place in arcades, betting shops, bingo halls, casinos and non-commercial large society lotteries. The Commission is also responsible for regulating the supply, use and manufacturing of gambling software and gaming machines as well as the National Lottery, although this is under different funding arrangements and legislation. Both the remote and non-remote sectors are licensed by the Gambling Commission, although spread betting does not fall under their remit, but rather under the control of the Financial Conduct Authority.
Regulation is based on the 2005 Act’s three licensing objectives:
1. Preventing gambling being the source, associated with or the support disorder or crime
2. Ensuring all gambling is carried out openly and fairly
3. Protecting vulnerable people and children from harm or exploitation by gambling
All new licence applicants are assessed for suitability by the Commission and they also carry out enforcement and compliance work regarding both unlicensed and licensed operators. It is their responsibility to offer advice to the Government regarding gambling’s impact and regulation.
The fee structure currently in place results from an evolutionary process that has taken place since the Gambling Commission’s 2007 inception, and over time there have been many developments in response to changes in the industry and the law itself. The 2005 Act also gives the Commission the authority to issue operating licenses to cover gambling facility provision as well as licenses to cover the supply and manufacturing of software and machines. To attribute costs accurately to the various operators, the licence types have subsequently been broken down by the Commission into specific licensing types which are then banded to ensure the costs are attributed to the operator directly in relation to the risk they present to the licensing objectives. At the present time, there are 6 determinants in play for the banding licence types, including premises size, GGY and number of premises.
The proposals put forward for changing the fee structure have been designed with the aim in mind of ensuring that fees stay in close alignment to the Commission’s regulatory activity and costs. They propose that this should be done by moving to GGY based fee bands rather than premises-based fee bands as this is deemed to be a better way of indicating gambling activity volume. It has also been suggested that fee bands be sub-divided, especially in the case of small or medium operators to allow smaller businesses to be subject to a smaller increase in annual fees when they grow and develop, and entry level fees be reduced for small businesses entering the gambling market. It has also been proposed that fee formulae be introduced to the top-end fee categories of some licence types to allow the fee income received by the Commission to reflect the effort required to regulate acquisitions, consolidations and mergers among the major gambling operators.