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Jowell offers rebels casino compromise 01/04/2007
The odds are against the Culture Secretary, with more parliamentary rejection and a challenge to her casino plans on the cards, writes Nick Mathiason

Like an addicted gambler insisting that the next bet will hit the jackpot, Tessa Jowell is this weekend battling to save her controversial casino legislation - and her career.

Though most saw it coming, the Culture Secretary lost her shirt when the House of Lords last week rejected her proposals for 17 new casinos. The development is a huge blow to Manchester's hopes of hosting the country's first Las Vegas-style casino but gives hopes to Blackpool that it may yet triumph.

But if Jowell thinks it cannot get any worse, she may well be wrong. Somehow, over the next two months, she has to rebuild her casino proposals. But there is a more pressing issue.

Tessa Jowell
Future Manchester casino site?
Within days, the beleagured Culture Secretary may face fresh humiliation. This week a High Court judge will decide whether a legal challenge by the British casino industry will be allowed to proceed. Most believe it will, despite government opposition.

Though the UK casino industry has moved swiftly to exploit a loophole allowing it to build dozens of new gambling dens and boosting revenue in the process, it is nevertheless furious that under Jowell's legislation, existing casinos are not allowed to match the number of slot machines and games tables available to those under new-style licences. This situation, they argue, is tantamount to unfair competition

A judicial review on behalf of industry giants, such as Gala Coral, London Clubs and Rank, would be heard in July - around the time that Gordon Brown is likely to made Prime Minister. This is just the sort of embarassing distraction that the current Chancellor would be keen to avoid as he maps out a new agenda for the country.

It would get worse for Labour if the legal challenge is successful. The nightmare scenario could leave the UK industry free to increase the number of slot machines on a par with the new-style casinos. This would create a political storm with mounting concern over the growing number of addictive slot machines, just as casinos are free to advertise.

It is this scenario that many believe will persuade Brown to abandon the entire casino package. Brown laid his cards on the table in his Budget when he dramatically raised the amount of tax that casinos now have to pay. The move, said to have been sprung on Jowell at the last minute, sent shares in the UK's only casino firm, Rank Group, tumbling.

'We're in completely uncharted territory,' said one senior gambling insider. 'Predicting the outcome is difficult.'

Insiders believe Jowell will now bow to parliamentary pressure and have separate votes on the supercasino and 16 new licences. 'It is hard to say what they will do, but Brown won't want this as background mood music,' said the well-connected gambling source.

The City is not impressed. For the past 10 years, gaming shares have risen on the promise of future growth from increased casino numbers and surging internet gambling revenues. Though many executives have trousered windfall bonuses, as private equity or foreign operators have consolidated the sector, shares have fallen sharply in recent months.

'Huge growth in the sector has not materialised,' admitted a City analyst. 'Britain was seen as an attractive territory. But things haven't gone to plan and the US internet gambling clampdown has hurt investors.'

Jowell's defeat last week is the latest twist in the tortuous process of her attempt to modernise 40-year-old gambling laws. In the eight years since the government embarked on this liberalisation, it has spent millions of pounds on consultations, parliamentary time and on establishing a new industry regulator.

Almost every decision taken by Jowell since taking charge of gambling policy from Chris Smith has backfired. But many within the industry insist the new reform has not been a waste of time. They say casinos are being modernised as they attempt to become mainstream leisure attractions.

The government signalled first that 40, and then that 24, was an appropriate number as a furious backbench revolt was egged on by newspapers. As its legislation limps on, there are only two real winners: the Conservative party and the bookmaking industry.

As parliamentary time was running out before the last election, it was the Conservatives who insisted they would kill the gambling bill unless the number of supercasinos was reduced from eight to one.

Labour was in the embarrassing position of relying on Tory support to keep its bill alive because dozens of Labour backbenchers were up in the arms about increasing the number of gambling venues. Since 2005, the Tories have resolutely refused to budge from their cautious stance, which they believe gives them the moral high ground.

Another winner is the bookmaking industry. Rising casino numbers have obsessed MPs, campaigners and the media. But a key tenet of new legislation - the lifting of demand restrictions on betting shops - has passed by almost unnoticed.

Under the previous act, bookies had to prove there was a demand for new shops. Although in reality new shops are rarely challenged, there is now little to stop bookies opening up as many shops as they believe the market can take.

After last week's vote, many industry figures argued that the government could have saved some face by having separate votes on the single supercasino and the 16 smaller licences. Many assumed the measure was drafted in this way so that MPs, about to get smaller casinos, would not vote aganst the government.

But lawyers representing a major European casino operator believe that, under EU freedom of enterprise law, allowing just one supercasino would lay the government open to a series of legal challenges so it had to lump all the casinos together.

It seems that, no matter which way Jowell turns, there is no winning formula for changing the gaming laws.