Effective gambling regulation is not just ‘red tape’

Recent changes to gambling regulation in Queensland will allow for a rapid expansion of the industry. AAP/Tracey Nearmy

The Queensland government has recently implemented changes to poker machine regulation under the banner of “red tape reduction”. Some of these are relatively minor at first glance; others have more obvious prima facie impact. All are designed to reduce the burden on industry and allow for the expansion of the gambling industry.

The big winners are clubs, which can now increase the number of electronic gambling machines (EGMs) they operate from 280 to 500 across multiple venues, with a maximum of 300 in any venue. Clubs also no longer have to locate new venues within their original community of interest – whether geographic or otherwise. A club with its origins in far north Queensland, or the far west, can now open a new venue in southeast Queensland – where the money is – with 300 EGMs in it.

Venue operators can also decide to pay winnings up to A$5000 in cash if they wish. Under previous rules, jackpot winnings were issued via cheque. The few winners had some chance of seeing that money if it were paid by cheque.

Now, in many cases, the cash is likely to quickly find its way back into the EGMs. As the Productivity Commission observed, 30% of those who gamble regularly on EGMs have difficulties in controlling gambling spending.

This risk is exacerbated by another change – allowing EGMs to accept any Australian bank note. Previously, these were limited to $20 notes. A $5000 payout in $50 or $100 notes can now be slotted back into the machines without first being changed.

Two natural brakes on dangerous behaviour have thus been removed.

The Victorian system

In Victoria, a coalition of local councils and their peak bodies recently launched a campaign for changes to the way EGM entitlements are decided. In Victoria, applicants (local venues) lodge an application detailing their proposal. Local governments have a right to respond to this within 60 days and may object.

The matter is heard and decided by the Victorian Commission for Liquor and Gambling Regulation (VCGLR). If either party is dissatisfied, there is an avenue for review by the Victorian Civil and Administrative Tribunal (VCAT).

The Victorian system is probably the most transparent in Australia. Councils are notified and have a right to participate, and applications are generally heard in public.

Nonetheless, in Victoria, applicants are overwhelmingly successful, despite often well-argued and expensive cases run by councils. Between July 2008 and September 2014 there were 154 VCGLR decisions on new venues or increases to venue size. Of these, 140 (91%) were granted in full, three (2%) were partly granted, and 11 (7%) were unsuccessful.

In the 68 cases where the council opposed the application, 57 were wholly successful (83.8%) and three partly successful (4.4%). Eight (11.8%) were unsuccessful. The success rate where a council opposes the application is thus a little less favourable to applicants than that overall, but not much.

A submission prepared for the Victorian Commission for Efficiency and Competition in 2012 determined that the average cost to councils of a VCGLR submission was more than $37,000, with a range from $10,000 to $110,000. This does not include VCAT appeals. Applicants typically employ expertise in the form of solicitors, barristers and expert witnesses. These expenses are a business cost deduction. Conversely, councils struggle to fund their cases.

The test to be met is that the application, if granted, would result in “no net detriment” to the local council area. Unfortunately, this test lacks precision. Usually, applicants rely on quantifiable factors such as the amount to be spent on renovations, the payment of a modest community benefit, or some calculation of the jobs to be created by the proposal. Social impacts are minimised and, lacking data on local suicide, divorce, bankruptcy or problem gambling rates, are generally negated by the alleged economic benefits.

That such social impact data, particularly data on problem gambling prevalence, are not actually available meaningfully is ignored. Relevant concepts or research findings are not considered unless they relate specifically to the venue or area. For the most part, that means they are not considered.

Also, the community of interest for these decisions is the entire council area. However, it is very often the case that many metro councils are far from socioeconomically cohesive. Maribyrnong in inner-west Melbourne incorporates both Yarraville and Braybrook. Yarraville is heavily gentrified and affluent, and according to the Australian Bureau of Statistics is in the top 30% for socioeconomic advantage in Victoria. Braybrook is in the bottom 10%.

Even at the council level the disparity is startling. The highest level of per capita losses in 2013-14 was in Greater Dandenong, in the top 10% of most disadvantaged councils in Victoria, where EGM density was 8.4 per 1000 adults and per adult spending was $984. Boroondara, in Melbourne’s affluent inner-east, had a density of 1.5 EGMs per 1000 adults and expenditure of $140 per adult, and sits in the top 10% for socioeconomic status.

Pokie machine distribution

In most of Australia, EGM distribution is skewed towards disadvantaged areas. Having big venues nearby is a big factor in the development of gambling problems. Under existing regulatory arrangements, this continues.

A recent decision by VCAT allowed the location of more EGMs in Braybrook, despite what many might regard as obvious saturation and disadvantage. Originally, VCGLR disallowed the application. VCAT overturned it, applying the existing test.

What local councils want is a “net benefit” test, where the applicant has to demonstrate how their application will produce real benefits for a local community. They want social impacts to be weighted at least as significantly as economic factors, and they want decision-makers to take into account useful data from any source.

Councils also want the community to be the object of the decision – not a highly diverse and heterogeneous council area, which is likely to change unrecognisably from one end to the other.

These are modest reforms but they may well have a very significant impact on the way EGMs are distributed in Victoria. In Queensland, the changes introduced under the guise of reducing red tape are also seemingly modest. But in both cases, they are capable of making a big difference to the way gambling affects local communities.