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Ronalds, Paul --- "Who's the Addict? The Need for Pokie Reforms in Victoria" [2002] AltLawJl 96; (2002) 27(6) Alternative Law Journal 267

  • Who’s the addict?: The need for pokie reform in Victoria
  • Who’s the addict?: The need for pokie reform in Victoria

    Paul Ronalds[*]

    Problem gambling contributes to poverty, homelessness, domestic violence, crime, social dysfunction and family fragmentation.

    In 1999, many people were shocked to learn that Australia had 20.4% of the world’s high intensity electronic gaming machines (EGMs, usually called ‘pokie machines’).[1] At that time, gambling revenue as a proportion of Victoria’s taxes was 16%. This figure is now nudging 20%, or more than $1 billion, elevating Victoria to the most gambling dependent state in Australia and among the most gambling dependent in the world.[2] A similar situation exists in New South Wales.

    The social costs of this level of gambling are enormous.

    In 1999, the Productivity Commission estimated that there were approximately 76,000 people with gambling problems in Victoria.[3] For every person with a gambling problem, between five and ten other people are affected to varying degrees by that person’s problems. The Productivity Commission found that there are 1600 gambling-related divorces a year nationally and that 13% of people in counselling for gambling problems reporting that their gambling had caused domestic or other violence.

    The Productivity Commission also estimated that 42.3% of every dollar that goes through an EGM comes from a person who is addicted to gambling.[4] Recent evidence suggests this proportion has now increased to almost 50%.[5]

    The Uniting Church estimates that, in Victoria alone, 30,000 families have been harmed by problem gambling.[6] One in ten people with gambling problems reported that they had contemplated suicide and nearly half of those in counselling for gambling problems reported losing time from work or study in the past year due to gambling. Problem gambling contributes to impoverishment, homelessness, psychological problems including stress, loss of trust and depression, relationship breakdown and violence in the home.

    Hanover Welfare Services estimates that 5000 Victorians experience a housing crisis or homelessness each year primarily because of their addiction to poker machines.[7]

    Problem gambling also leads to increased crime in the community. Based on court records, last year people with gambling problems were convicted of stealing more than $11.7 million. A recent study suggests that gamblers with large debts may be committing up to 20% of white-collar crime.[8]

    Of course, the social cost of problem gambling is not distributed evenly in the community. The greatest proportion of machines is located in poorer socio-economic areas.[9]

    These problems are not isolated to a small group of players. Only about 10% of adult Victorians are regular players (at least monthly) and the Productivity Commission estimates that 27.2% of Victorians who are weekly players are problem gamblers.[10]

    Even the claim that gambling is good for economic activity is doubtful. The Productivity Commission found: ‘Net gain[s] in employment and activity are small … when account is taken of the impact on other industries that lose the consumers’ dollar to gambling’.[11] Economic modelling by Dr Jamie Doughney at The Workplace Studies Centre, Victoria University, has found that job losses from other businesses and industries outweigh any jobs created by the introduction of EGMs into a region.

    Despite these overwhelming statistics, obtaining meaningful reform in the way pokie gambling is regulated and conducted has proved very difficult. While there has been a willingness to consider self-help, identification or early intervention strategies, both the government and the gambling industry have strongly resisted structural reform.

    Nonetheless, in the lead up to the next Victorian state election, the Greens and Democrats are both expected to advocate significant new restrictions on pokies and there are a number of community groups agitating for reform. The state government has responded by establishing a roundtable that brings together community groups, gambling industry participants and government for the purpose of achieving some consensus on gambling reform. In addition, on 19 July 2002, the Premier of Victoria authorised the conduct of a two-part review of Victoria’s gaming and gambling legislation in response to a recent report of the Ombudsman on matters arising from the Office of Gambling Regulation’s Investigation of International Gaming Technology.[12] The federal government is also involved through the National Advisory Body on Gambling, which was established to investigate reforms that the federal government could initiate.[13]

    This article examines the regulation of the gambling industry in Victoria and identifies a number of shortcomings with the current system. Given that most of the social harm associated with gambling is related to pokies, the article focuses on this aspect of the gambling industry and considers a number of reforms that have been suggested by various community groups and academics.

    Current regulation of gambling in Victoria and a review of recent reforms

    According to a recent Consultation Paper released by the Victorian Gaming and Gambling Legislation Review Panel:

    Regulatory management is governed by 11 Acts of Parliament, 36 sets of Regulations and six directions from the Minister for Gaming. In all, there are 1,600 pages of rules.. Each year, there are approximately 630 decisions made by the Victorian Casino and Gaming Authority (VCGA) and approximately 9,700 decisions made by the Office of Gambling Regulation (OGR) Director in his statutory roles as Director of Gaming and Betting and Director of Casino Surveillance.[14]

    The VCGA is the principal body established to manage all of this regulation. While it was formed as an independent statutory body, it was not given any managerial or administrative staff of its own, instead relying on staff employed in the OGR, an administrative unit of the Department of Treasury and Finance (DTF).

    Given DTF’s role in generating revenue for the state and the obvious policy tension between a robust gambling industry and strong gambling revenues on the one hand, and the community costs of problem gambling on the other hand, it is not surprising that groups such as the Inter-Church Gambling Taskforce (ICGTF)[15] have been very critical of this structure. The ICGFT believes that this structure has resulted in gambling policy being overwhelmingly influenced by DTF’s revenue generating role. This role and associated ethos and culture promote revenue generation ahead of reducing the social and economic costs of gambling.

    Since its election, the Bracks Government has introduced a number of reforms such as requiring clocks on machines and increased lighting in gaming venues. Perhaps not surprisingly, these ‘modest’ reforms have not been sufficient to stop the increase in losses racked up by Victorians on pokie machines. According to the most recent state government figures, last financial year losses on poker machines increased by $260 million or 8.3% over the previous year.

    On 25 February 2002, the Victorian Government announced a number of new reforms, including a ban on $100 notes, a maximum bet limit of $10 and a cap on the maximum spin rates at current levels. However, once again, a cynical observer might suggest that these reforms have been designed to allow the government to be seen to be doing something without actually impacting on the problem. For example, the Productivity Commission found that, on average, people with gambling problems bet $1.67 per button push, suggesting the $10 limit will have no impact. Similarly, industry insiders suggest that very few $100 notes are currently used and certainly ATMs do not provide them.

    In contrast, one of the few worthwhile reforms that the Bracks Government has introduced is a smoking ban in ‘gaming venues’. Although this reform was introduced on the basis of ‘health concerns’ and the government initially tried to limit it to a 2.5 metre zone around machines, the reform provides a way to introduce breaks in play for many addicted gamblers. The smoking ban took effect on 1 September 2002 and, according to newspaper reports and anecdotal evidence, has significantly reduced pokie turnover, suggesting that it may have some impact on problem gambling.

    The challenge, of course, is to have either the Liberal or Labor Party make a substantial commitment to reducing problem gambling in the lead up to the next election. Like the refugee issue federally, the substance of both parties’ policy is revenue protection irrespective of the harm done to the community.

    Reforms to the way gambling is regulated in Victoria

    As indicated above, the Gaming and Gambling Legislation Review Panel is currently reviewing the regulation of gambling in Victoria.

    Preliminary recommendations of the Panel shift responsibility for gaming and gambling away from the DTF to the Department of Justice and replace the VCGA with a Commissioner for Responsible Gambling (CRG) and a Commissioner for Gambling Regulation (CGR). These recommendations have already been endorsed by the Bracks Government.[16]

    Community groups have broadly welcomed these moves but have insisted that they do not go far enough. They are concerned that under the proposals outlined in the Consultation Paper, the CRG would be a public servant who reported through the Secretary of the Department of Justice to the Minister for Gaming. As such, this person would be bound by existing government policy and could not play an independent role in promoting reforms that would reduce the harm caused by gambling in Victoria.

    In these circumstances, the Victorian Treasurer and DTF would continue to exert significant influence on any reform proposals that may impact on the revenue generated by gambling.

    Therefore, while the proposed creation of a CRG is a step in the right direction, the position should be an independent statutory one, established in a similar way to the state’s Ombudsman.

    The Consultation Paper also suggests that the CRG would have responsibility to encourage, facilitate and promote responsible gambling. While these are laudable responsibilities, they may not be sufficient to have a meaningful impact on problem gambling in Victoria. The VCGA had a similar role, which most community groups believe it failed to perform. As a result, the ICGTF has suggested that the CRG’s responsibilities should include the explicit responsibility for minimising the social and economic harms caused by gambling to the community and individuals.

    This proposed wording is arguably consistent with the government’s existing obligations to the community. As Doughney argues in his recent book, The Poker Machine State, the government, at the very least, owes a fiduciary duty to avoid doing wrong to the community. In support, he quotes Gaudron J from the Teoh case:

    Citizenship involves more than obligations on the part of the individual to the community constituting the body politic of which he or she is a member. It involves obligations on the part of the body politic to the individual, especially if the individual is in a position of vulnerability … so much was recognised as the duty of kings … No less is required of the government and the courts of a civilised democratic society.[17]

    For Doughney, the issue is not ‘about individual person’s rights to use poker machines, which may be supported other things being equal, but whether governments and poker machine businesses have a right to cause the harm that they so palpably do in the pursuit of profits from the activity’.[18]

    I would argue that the government has not fulfilled this fiduciary duty, certainly not in a moral sense and possibly not in a legal sense. Establishing an independent office with the express responsibility for minimising the social and economic costs of gambling, would be a way to start to address this failure.

    In practice, this responsibility could entail:

    • advising the Minister for Gaming and the Minister for Community Services of policy, legislative and regulatory requirements to minimise the economic and social harms from gambling;

    • developing community education and training initiatives aimed at reducing problem gambling;

    • monitoring the effectiveness of legislation and regulation in minimising economic and social harms from gambling;

    • acting as a point of contact with community groups that are stakeholders in areas where gambling causes economic and social harms; and

    • initiating research by the Gambling Research Panel on minimising the social and economic costs of gambling.

    The Panel’s Consultation Paper suggests that the CRG will have a role in developing ‘community based solutions’ to problem gambling. The gambling industry has continually focused on community-based self-help, identification or early intervention strategies, but not structural reform. However, identification and intervention strategies are extremely complex to devise and implement. On the other hand, the accessibility of gambling venues, the intensity of play, the design of EGMs, the rate at which people can lose money on EGMs and the ready accessibility of cash in venues has resulted in Victoria experiencing higher levels of harm from gambling than in a number of other jurisdictions in Australia and overseas. The CRG should therefore be empowered to recommend to government broader structural changes to minimise the harm from gambling.

    Many of the changes that groups, such as the ICGTF, have achieved have been undermined by the gambling industry’s response to those changes. For example, the ICGTF believes machine design changes since the 30,000 EGM cap was introduced have effectively undermined much of the value of this reform. According to Tim Costello and Royce Millar, the maximum average losses per hour per machine in Australia were A$720 in 1999, compared to A$130 lost on British machines.[19]

    These machine design changes have occurred without any government approval or assessment of the social costs. While the industry calls for research to be conducted prior to any reform being implemented, these machine design changes are made without any such research or assessment.

    Local government and community groups have also been continually frustrated by the VCGA’s limited understanding of gambling legislation and its role, its lack of transparency and their difficulty in raising issues of concern other than through the media.

    Local councils and community groups constantly contact the organisation for which I work, Urban Seed, frustrated by their apparent powerlessness to impact on decisions about venue location. This powerlessness is in direct opposition to the Bracks Government’s stated objective of increasing the power given to local communities over decisions that impact on their local community. The current planning laws and appeal process do not fulfil this function.

    As a result, the ICGTF has also recommended that local governments’ planning authority for the determination of gambling venues be restored.

    Reforms to the way gambling is conducted in Victoria

    The ICGTF recently released its ‘Fair Gambling Policy’ for the forthcoming Victorian state election. The policy concentrated on five main reforms.

    One of these was the creation of an independent statutory organisation charged with the explicit role of minimising the social and economic costs of gambling. This reform has been examined in the previous section.

    The other reforms relate to the way pokie gambling is conducted in Victoria. These reforms are:

    • reduce the number of pokies to less than 15,000;

    • introduce measures to reduce intensity of play;

    • remove ATMs from gambling venues; and

    • pay out winnings of more than $250 by cheque.

    Many of these reforms were also proposed in Susan Davies’ private members bill[20] and Dr Doughney has proposed similar reforms in his recent book.[21]

    Reducing accessibility to pokies

    The ICGTF believes that a drastic reduction in the number of EGMs will be one of the most effective methods of reducing problem gambling, if conducted in such a way as to reduce accessibility of EGMs. The ICGTF has argued that this would require reducing the maximum number of EGMs in Victoria to no more than 15,000.

    Certainly, in a number of other Australian and overseas jurisdictions where pokies are restricted to far fewer venues, there are significantly less people with gambling problems per capita than in Victoria. As the Productivity Commission indicated, problem gambling prevalence is highest in those states where accessibility is greatest.[22]

    This evidence is supported by psychologists who argue that there are considerable behavioural differences between people who plan a night of entertainment and determine how much they will spend and those people who visit gaming venues placed in ‘transistion zones’ such as shopping centres and around train stations on the way to, from or during work.

    A recent VCGA community impact study by KPMG found that most people play within 2.5 km of their home.[23]

    The industry and government have responded to this reform by claiming that it would expose the government to massive compensation claims. However, legal advice to Urban Seed from one of Australia’s leading Queen’s Counsels indicates that there is no contractual restriction on such reform. Certainly, since publicly releasing this advice, the government has refused to make public any advice it has received to the contrary.

    This reduction in pokie numbers could be phased in to assist the government to find revenue replacement options. For example, from 2007/08 it is estimated that the revenue from the GST will become revenue positive for the state. These funds could be used to help reduce the state’s reliance on gaming taxes.

    Reducing intensity of play

    Legislation should establish a limit on the maximum amount of money that may be lost per hour on an EGM. Not only would this reduce problem gambling, it may also improve people’s enjoyment of the product. I often speak with pokie players who bemoan the increase in intensity of machines. This is not surprising. As Doughney argues, pokie machine playing is not really gambling since the returns (at least in the long run) are set, 87 cents for every dollar that is spent. Players are essentially buying distraction time and could therefore be expected to want their money to last as long as possible. The only people that benefit from high intensity are the industry and government.[24]

    The ICGTF believes that this limit should be set at no more that $50 per hour. Assuming an EGM was able to be played 21 hours a day for 360 days a year, this limit would still allow a theoretical maximum annual revenue per EGM of $378,000. This is still a massive return on a relatively inexpensive machine.

    An advantage of such legislation is that the gambling industry itself would be free to decide the most effective way to comply with this limit, thereby limiting any impact on recreational gamblers.

    Removing ATMs from venues

    ATMs and EFTPOS facilities in gambling venues provide ready access to cash to people with gambling problems. I believe that removing access to ATMs and placing limitations on EFTPOS facilities at EGM venues would significantly reduce problem gambling behaviours.

    The Productivity Commission found that people with gambling problems were far more likely to use ATMs to withdraw money to gamble when playing EGMs relative to recreational gamblers.[25]

    Even recent research commissioned by the gambling industry from the University of Sydney Gambling Research Unit found that visits to ATMs in venues were linked to heavy losses.[26] Alarmingly, people with gambling problems would continue to gamble until they had used up all the money available to them through ATMs located in venues.[27]

    Another recent gambling industry sponsored survey found that 83% of venue patrons in Ballarat did not use ATMs in the venue.[28] This suggests that removing ATMs from EGM venues is unlikely to inconvenience the majority of patrons, while being likely to assist a significant proportion of people with gambling problems.

    Paying winnings of more than $250 by cheque

    Winnings over $250 should be paid entirely by cheque. This is already the case under Queensland and Northern Territory regulations. In Victoria, winnings over $2000 must be paid by cheque. In New South Wales, venues are required by regulation to pay winnings over $1000 by cheque. Paying large winnings by cheque gives the person a significant break before they decide to use the money for gambling purposes again.

    Conclusion

    Many people liken the position of the gambling industry today to that of the tobacco industry 10 or so years ago. Certainly, some legal actions have already been initiated and there are reasons to believe that further actions against either gambling industry participants or the state are possible. Like cigarette manufacturers, it is arguable that the industry has designed its venues and machines to be addictive (the absence of clocks or natural lighting in venues and the hypnotic lights of pokie machines are not accidental design flaws) or at least is aware of their addictive nature.[29] In these circumstances, is it unconscionable for them to take advantage of people who become addicted?

    There has also been some suggestion in the media that class actions could be brought against the gambling industry in Victoria. This follows a ruling on 6 May 2002 by Justice Roger Banford of the Quebec Superior Court that a class action against Loto-Québec, a government owned agency that operated video lottery terminals, could proceed.

    However, achieving reform by a series of legal actions is unlikely to result in good policy making. It would be much better if the government acknowledged their fiduciary responsibility to the community, undertook meaningful reform along the lines of those proposed above to dramatically reduced the number of Victorians who suffer from problem gambling and its consequences and developed policies to replace the revenue that such reforms would inevitably erode.

    And at the end of the day, that is the choice politicians face in the upcoming state election: either ‘manage’ reform through broad legislative changes that are supported by the community or have the reform imposed on them by public pressure and legal liability.


    [*] Paul Ronalds is Director of Operations at Urban Seed, a non-government organisation based in Melbourne’s CBD which works with people at the margins of society, including many problem gamblers. Paul also assists the Interchurch Gambling Taskforce with its activities and is a member of Communities Against the Pokies Plague, an affiliation of community organisations concerned about problem gambling.

    email: paul.ronalds@urbanseed.org

    ©2002 Paul Ronalds (text)

    [1] Productivity Commission, Australia’s Gambling Industries, Report No. 10, AusInfo, Canberra, 1999, Box 2.4, p.2.10.

    [2] Hayward, D. and Kliger, B., Breaking a Nasty Habit? Gaming Policy and Politics in the State of Victoria, Swinburne Institute for Social Research, Melbourne, 2002, Table 5.

    [3] Productivity Commission, above, ref 1, Table 6.11, p.6.46.

    [4] Productivity Commission, above, ref 1, Table 5.7, p.5.15.

    [5] A 2001 study suggested that the proportion of EGM revenue coming from people with gambling problems is increasing, with their finding that 48.2% of EGM revenue came from people with gambling problems (Australian Institute for Gambling Research, Survey of the Nature and Extent of Gambling and Problem Gambling in the ACT, University of Western Sydney, July 2001, p.114).

    [6] Uniting Church, Victorian Synod, It’s a Risky Business: The Impact of Gambling on Families in Victoria, June 2002.

    [7] Gambling the Home Away, Hanover Welfare Services, Melbourne, 2001.

    [8] Crofts, Penny, Gambling and Criminal Behaviour, University of Technology, Sydney, 2002.

    [9] For example, a Victorian Casino and Gaming Authority report found that the EGM tax burden on people earning less than $10,000 a year is 6400% of that paid by people earning over $60,000 (Victorian Casino and Gaming Authority, Social and Economic Effects of Electronic Gaming Machines on Non-Metropolitan Communities, December 1997). See also Doughney, J. and Sinclair, G, Demography and Poker Machine Gambling: The Social Policy Implications of Social Banditry, Workplace Studies Centre, Victoria University, Melbourne, 2000.

    [10] Productivity Commission, above, ref 1, Volume 1, Table 8.3, p.8.23; see also Hayward and Kliger, above, ref. 2, p.20.

    [11] Productivity Commission, above, ref 1, p.5.36.

    [12] Victorian Ombudsman, Report on Matters Arising from the Office of Gambling Regulation Investigation of International Gaming Technology, Victorian Government Printer, Melbourne, June 2002.

    [13] Gambling regulation is a state matter but there are a number of Commonwealth powers that could be used as the basis for reform including the banking power in relation to the location of ATMs.

    [14] Gaming and Gambling Legislation Review Panel, Review of Gaming and Gambling Legislation, September 2002.

    [15] The Interchurch Gambling Taskforce was established in 1995 by the Heads of Churches in Victoria. Its members are taken from the Roman Catholic, Anglican, Uniting, Baptist and Salvation Army churches.

    [16] ‘State to Abolish Gaming Watchdog’, Age, 20 September 2002.

    [17] Minister for Immigration and Ethnic Affairs v Teoh [1995] HCA 20; (1995) 183 CLR 273, 304.

    [18] Doughney, J., The Poker Machine State, Common Ground Publishing, Melbourne, 2002, p.63.

    [19] Costello, T. and Millar, R., Wanna Bet? Winners and Losers in Gambling’s Luck Myth, Allen & Unwin, 1999, pp.77-8.

    [20] Gambling Legislation (Responsible Gambling) Bill 2000.

    [21] Doughney, J., above, ref 18, ch.9.

    [22] Productivity Commission, above, ref 1, Chapter 8, Box 8.1.

    [23] KPMG Consulting, Longitudinal Community Impact Study for Victorian Casino and Gaming Authority, Melbourne, 2000.

    [24] Doughney, J., above, ref 18, 2002.

    [25] Productivity Commission, above, ref 1, p.16.61.

    [26] Blaszczynski, A., Sharpe, L. and Walker, M., The Assessment of the Impact of the Reconfiguration on Electronic Gaming Machines as Harm Minimisation Strategies for Problem Gambling, The University of Sydney, November 2001, pp. 58-9, 63.

    [27] Blaszczynski, A. and others, above, ref 26, pp.80, 83.

    [28] ACIL Consulting, The Impact of Gaming in Ballarat, 14 December 2001.

    [29] James Doughney suggests Tattersalls and Tabcorp ‘aggressively targets markets in an effort to maximise its interest, namely its duopoly rents. Its advertising, lighting of venues and even choice of music and images are designed to promote intemperance’: Doughney, J., above, ref 18, pp.61-2.


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