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 National Audit Office says Gambling Commission is too weak 29/02/2020
• The Gambling Commission is outpaced and outgunned by betting companies, according to a government report warning that the watchdog is struggling to protect people from gambling-related harm.

The National Audit Office, which monitors the effectiveness of public bodies, said the regulator had not adjusted to technological change such as the rise of online and mobile gaming. It said funding constraints had hampered the commission, which has an annual budget of £19m but regulates an industry that took £11.3bn from punters last year.

The commission is “constrained by factors outside its control, including inflexible funding and a lack of evidence on how developments in the industry affect consumers,” the NAO said.

It concluded that the regulator was “unlikely to be fully effective in addressing risks and harms to consumers within the current arrangements”.

Its verdict comes after the government promised to review the 2005 Gambling Act, following successive scandals that have cast doubt on the industry’s commitment to rein in disordered gambling.

High-profile cases include revelations about the industry’s use of so-called “VIP schemes”, as well as concern about the impact on young and vulnerable people of gambling advertising and its links to football.

While the commission has ramped up the level of fines it issues, from £1.4m in 2014-15 to nearly £20m last year, it has struggled to keep pace with changing trends, the NAO said. These include a 56% rise in advertising spending between 2014 and 2017, most of it via online and social media channels rather than television.

The NAO also pointed to the increase in the proportion of online gambling that happens via mobile phone, up from 23% in 2015 to 44% in 2018.

Gareth Davies, head of the NAO, said: “The risks to gamblers are changing as technologies develop. Yet the Gambling Commission is a small regulator in a huge and fast-evolving industry. While the commission has made improvements, gambling regulation lags behind the industry.”

The NAO called on the commission and the Department for Digital, Culture, Media and Sport (DCMS) to do more to encourage companies to surpass minimum standards on problem gambling protection, including “financial and reputational” incentives.

It also called for a review of the commission’s funding model, via fees paid by operators for licences.

A report ordered by the House of Commons highlighted a number of deficiencies in the regulator’s ability to protect consumers, enforce licence conditions and even effectively measure the results of its regulatory work.

This started with the regulator’s core goal of protecting consumers. Problem gambling rates in Great Britain had remained constant since 2012, with around 395,000 problem gamblers, and a further 1.8m adults considered to be at risk of gambling-related harm.

While the Commission has consistently stated its goal of reducing these figures, the NAO said it had yet to explain what sort of reduction, and over what period of time, would consistute progress towards this goal. It had also failed to articulate in detail how it determines which consumers may be vulnerable, and when.

“Regulators need clear, measurable objectives so their teams and the external stakeholders they work with have a common understanding of what they are aiming to achieve and can judge progress,” the NAO explained.

“The Commission has translated its statutory objectives and overall aim to make gambling safer into strategic priorities, business plan activities and high-level outcomes it wants to achieve. However, it has not yet developed these high-level outcomes into detailed, measurable success criteria against which to judge progress.”

This may be due in part to gaps in the data and intelligence used by the Commission to identify the problems consumers experience with gambling services or operators, another issue highlighted by the NAO.

This was particularly apparent for land-based gambling, which relies on local licensing authority inspections for analysis on gambling premises. However, 119 authorities did not conduct any inspections in the year to 31 March 2019, with around 60 failing to do so over the past three years.

Furthermore, the Commission failed to make full use of its own data to identify consumer problems, the audit said. It was contacted by consumers on around 33,000 occasions in the past year, though does not use this input as part of its research.

Ultimately, the NAO concluded, the Commission did not have a full understanding of the impact of its work, or even whether it is achieving its overall objective of protecting customers.

Its ability to govern a changing industry was also called into question. As it is unable to change funding models, it cannot invest in new skills to address emerging risks, despite highlighting skill gaps in areas such as addictive technologies and cryptocurrencies.

As a result, the regulator’s ability to respond to industry changes is hampered by a lack of understanding on how such changes actually affect consumers. This results in regulatory stasis, where the Commission (despite having the power to make regulatory changes) doesn’t have the insight to make the correct alterations, resulting in legislative process grinding to a halt.

The NAO highlighted the example of fixed-odds betting terminals (FOBTs). While the Commission was unable to change stake limits, it did have the power to place new controls on operators, and advise the government that change was needed.

Indeed, it first advised the government that the industry needed to improve transparency and harm reduction measures around FOBTs in 2013. Due to a lack of evidence, however, the regulator felt unable to make a concrete recommendation on reducing stake limits until 2018.

Even enforcement, following a year that has seen enforcement actions taken against nine licensees, and £19.6m in settlements levied, was queried. It was unclear how effective this was as a deterrent, the NAO said.

The regulator itself acknowledged that its Licensing Conditions and Codes of Practice (LCCP) had perhaps not been as effective in making gambling safer since 2015. The NAO said that despite the Commission talking about encouraging the industry to raise standards, it did not offer any sort of financial or reputational incentives - or any other strategy - for doing so.

There was little evidence of it being able to help consumers seeking redress where operators had failed to meet social responsibility codes of practice, with the Commission struggling to consistently direct such individuals to support or dispute resolution bodies.

It therefore concluded that the regulator “does not have a full understanding of the impact of its work or whether it is achieving its overall objectives to protect consumers”.

The NAO noted that this was not solely down to the regulator, and that input from the Department of Culture, Media and Sport was required. With DCMS, it said, the Commission should look to develop a deeper understanding of gambling-related harm, especially around how social and technological developments affect gambling habits.