The Government ought to rouse our sleeping casinos

Christopher Snowdon is a Fellow of the Institute of Economic Affairs. Follow Christopher on Twitter.

They say that laws are like sausages, it is better not to see how they are made. If so, the 2005 Gambling Act was of the supermarket own-brand, ‘sixteen for a pound’ variety. It began with some sensible proposals from the distinguished economist Sir Alan Budd and ended with a fudged piece of legislation which had been built up, torn down and hastily patched back together.

The 2005 Act aimed to reform every part of the British gambling industry but it was casinos which drew all the attention. You may recall that peculiar period in late 2004 and early 2005 when there was fevered talk of “Las Vegas-style super-casinos” in parts of the press. It was never adequately explained what a super-casino was, nor how it threatened the moral health of a nation more seriously than a common or garden casino. Nevertheless, the prospect of such an establishment being built in Blackpool or Manchester became a fleeting tabloid obsession.

Unusually for New Labour, the problems stemmed from poor presentation. The earlier 1968 Gaming Act had granted a set number of casino licences to be used in a set number of permitted locations. In the spirit of localism, Labour recommended giving any town the chance to have a casino if it so desired, subject to planning permission, consumer demand and approval from the Gambling Commission and local council.

With hindsight, it would have been better if Labour had mooted some limits to casino development from the start. Transferring power from central to local government was never likely to lead to the country being overrun with gambling dens, but for those who disapproved of casinos, it was enough to know that there would be no theoretical limit on their number. Opposition came from the incumbent gambling industry, backbench MPs, certain newspapers and faith groups such as the Salvation Army. This alliance of political enemies, vested interests and moral entrepreneurs won the day. No ‘super-casino’ will be built in the UK and, in many respects, the casino industry is in a worse state today than it was a decade ago.

In its haste to appease its critics, the government discarded necessary reforms which would have attracted little attention had they not been part of a broader package of deregulation. After blowing too hot in 2000-03, the government blew too cold in 2004-07 and the modest reforms required for the casino industry to adapt to the twenty-first century were abandoned along with the headline-grabbing schemes for ‘super-casinos’.

Today, the casinos that were created by the 1968 Act are still tied to the same old permitted areas. This means over-provision in some places and under-provision in others. Punters could take some consolation from the sixteen new licences that were created by the 2005 Act, but these were mainly granted to places which are already well served with casinos, such as Leeds, or places which do not have sufficient demand for them, such as Stranraer. Seven years later, only one of these sixteen casinos has been built. It is unlikely than more than a handful ever will be.

The radical shake-up of the casino industry that was first envisaged never took place, but it was surely nobody’s intention to prevent existing casino licences from being used. Today, however, more than fifty of the country’s 202 casino licences lie dormant despite several local councils expressing an interest in using them. As I explain in a new Institute of Economic Affairs paper Seven Years Later: Casinos in the Aftermath of the 2005 Gambling Act, this is the result of poorly drafted legislation which failed to make the basic reforms that anyone familiar with the industry agreed were needed over a decade ago.

There was never even a remote possibility that the UK would see “blackjack on every street corner”, as theDaily Mail once put it, but it does not seem unreasonable for any sizeable town or city be able to host at least one small casino if the community is in accord. If the current government is not prepared to look again at regenerating one or more seaside destinations with a resort casino, it should at least allow the take-up of existing licenses by the many local authorities that would welcome the jobs and investment a casino would bring.

The economic benefits that would derive from modest reforms (which require no new laws to be passed) would not be trivial. It is estimated that an average casino generates between 120 and 150 jobs and produces £600,000 in gaming duty each year. With more than fifty licences currently unused, the Exchequer is potentially foregoing more than £30 million. This is not going to pay off the national debt, but nor is it peanuts. Quick fixes do not come along very often in tough economic times, but this could be one.