CHARLES LIVINGSTONE. Is gambling reform possible?

Mar 16, 2018

Gambling reform has been in the headlines lately – perhaps more than at any time since the Wilkie-Gillard agreement was shot down by ClubsNSW between 2010 and 2012.

The recent Tasmanian election pitted the ALP, the Greens and Jacqui Lambie’s nascent, eponymous party against the Liberal-pokie alliance. The latter came out on top, having spent an estimated $5 million (an unprecedented electoral spend for a Tasmanian election). Certainly, money talks. The question is, will the association with the gambling lobby, and particularly the state’s ‘absentee landlord’ pokie supremos, the Farrell family, tarnish Hodgman’s government?

In South Australia, Nick Xenophon has adopted a less radical plan to better regulate, but not eliminate, pokies. Will this generate traction with voters, in the face of an equally frantic campaign by the pokie-loving Australian Hotels Association? We’ll find out soon enough.

Perhaps more importantly, has the atmosphere changed around how politicians and the electorate view Australia’s systems for gambling regulation, and in particular, pokies?

There is an argument that things are changing, even if such change is only preliminary. Pokies are still everywhere (except in WA, where they remain isolated to the single casino).

They continue to make massive revenue, particularly in NSW. In 2015-16, the Australian Gambling Statistics report that total pokie expenditure (i.e., what people lost using pokies) was up an average 4.2% across Australia, fueled largely by a 6.2% increase in NSW. Total spending on pokies was $12.1 billion, with NSW contributing more than half that ($6.1 billion). Overall, pokies in pubs and clubs account for 51% of Australia’s $23 billion spend on gambling. Yes, sports betting is up by 13% – to $920.8 million, or less than 4% of the total. It is growing fast, but it’s clear: the main game is the pokies.

Gambling harm is 75% attributable to pokie gambling. A recent study of the economic costs of gambling put it at nearly $7 billion for Victoria alone. Adopting that methodology to produce an Australia-wide estimate yields an annual cost of $22.7 billion, four times more than the States’ collective $5.8 billion gambling revenue stream.

Perhaps more importantly, because each high risk (‘problem’) gambler affects six others, and each moderate risk gambler affects three others, we know that around 2.5 million Australians are adversely affected by gambling at any one time. The vast majority of these people are not gamblers. They are spouses, partners, children, relatives, employers, ordinary members of the community. The effects include financial catastrophe, loss of major assets, divorce and separation, neglect and mistreatment of children, intimate partner violence, other crimes, both against persons and property, mental and physical ill-health, and in some cases suicide. These are not trivial.

Pokie reforms: state regulation

Since 2010, there has been much movement across Australia on pokie reform. Most of it attracts little attention, but it shows how governments can move incrementally to bring about positive change. As ever, NSW remains the outlier.

In every state except NSW and the ACT, the maximum bet allowed on a club or pub pokie is now $5. SA adopted this last year; in Victoria, it was adopted in 2012. In NSW and the ACT, the maximum has stayed at $10. Although a significant multiple of the Productivity Commission’s recommendation of a $1 maximum, the reductions from $10 to $5 demonstrate the feasibility of implementing harm minimization measures of this type. Similarly, most states have dramatically reduced the ‘load-up’ limit, the amount that can be stuffed into a pokie at any one time. In NSW, it was reduced from $10,000 to $7,500 a couple of years ago. However, in Queensland it’s $100, in Victoria $1,000. SA allows only coin operation. Outside NSW, changes were introduced without much fanfare, and demonstrate the efficacy of addressing game characteristics as a means of reducing harm.

Victoria has introduced a system of voluntary pre-commitment, allowing pokie users to choose a limit for their gambling expenditure. It has very low take up rates, as research demonstrated would be the case. However, the system is networked across every one of the state’s pokies. It can readily be adapted to a universal scheme – one where everybody has to nominate a maximum amount they’re prepared to lose across specific time frames. It did not bankrupt the pokie operators, which ClubsNSW argued would happen when railing against the Wilkie-Gillard reforms. Victoria has also taken ATMs out of pokie venues. The evidence indicates this had a positive effect, particularly on high risk gamblers. The gap has been filled to a significant extent by customized EFTPOS facilities, but the principle has been established.

In Queensland and Tasmania, a game characteristic known as ‘losses disguised as wins’ has been outlawed, essentially on consumer protection grounds. This characteristic is an important element of the many tricks used by pokie manufacturers to ramp up the reinforcement provided by pokies. It provides for a reinforcement (lights, positive sounds and congratulatory stimuli) to occur when a pokie user gets a prize on one of a number of lines being used on contemporary, multi-line games. This occurs even though the net result is a loss. For example, a bet of 50 cents (possible on a 50-line game betting at one cent per line) may produce a reward of five cents on one line. The net result is a 45 cent loss, but the game celebrates as though this were a win. This means the reinforcement rate of the game is doubled, at no additional cost to the operator. It makes the game more addictive and thus more profitable. This feature was one of those addressed in the recent Federal Court case, brought by Shonica Guy against Crown and Aristocrat. That case did not succeed. Nonetheless, both Queensland and Tasmanian regulators believe the feature to be antithetical to consumer interests, and have prohibited it.

In both South Australia and Victoria, regulatory decision makers have been persuaded that social impacts of gambling outweigh the alleged economic benefits. High profile cases in both jurisdictions have taken into account contemporary research about, for example, the effects of pokie gambling on intimate partner violence (it increases it markedly) and the lack of proven effects for the ‘responsible gambling’ codes that all venues tout as their panacea for gambling problems. These may seem like self-evident considerations. They have not been so seen. Until recently, the approval rate for applications to increase pokie numbers in Victoria was about 95%, or more if the review process were taken into account. Pokie operators have limitless, tax deductible cash to spend on their applications. They employ small armies of consultants and lawyers, and can only be formally opposed by local governments. LGAs lack resources, are usually inexperienced, and reluctant to spend ratepayers’ money on the scale available to applicants. Despite this, recent cases have shown marked change to decision making considerations. Maybe this is a hiccough; it seems otherwise.

The NSW government has recently adopted ‘reforms’ to the regulation of pokie gambling that purport to limit their impact on disadvantaged communities. Whether this will be the result is questionable. These reforms are, effectively, delivery of the terms of the ‘memorandum of understanding’ signed by the previous Premier before the last election, and give the clubs mostly what they want. Again, NSW is an outlier, but it is at least pretending it wants to reduce harm. Hypocrisy, after all, is the price paid to virtue by vice. These days, they have to at least pretend they care.

The research agenda

Gambling research is a small, and relatively new field. It has been dominated by psychologists of the abnormal and experimental tendency. It began, because of this, as a field focused on the individual factors that are seen to give rise to gambling problems. This is particularly the state of the field in the USA. This was a gift to the gambling lobby. As with alcohol and other health issues associated with some form of consumption, industry is keen to paint gambling harms as a problem of individual weakness – a failure of the will. Thus, the gambling industry was quick to fund academic and other researchers to promote the idea of individual responsibility and develop the construct of the ‘problem gambler’, the person who has some form of illness or moral failing which renders them susceptible to gambling problems. The oppositional figure in this is the ‘recreational gambler’, consisting of all those ‘many’ members of the community who gamble without harm and have enormous fun doing so. (Hint: most people don’t gamble beyond buying occasional lottery tickets). The problem gambler is thus an aberration. The solution is to identify them and send them off to be cured. This is, for example, ClubsNSW’s nostrum for deflecting the unavoidable fact of gambling harm.

This approach has been manifest in two key concepts promoted by industry, and their pet researchers. These are ‘responsible gambling’, and the ‘problem gambler’. The latter concept has been promoted further by the use of various psychometric instruments that purport to measure the extent of gambling ‘problems’ in the community. This excessively categorical typology is the subject of endless ‘prevalence studies’, hugely expensive surveys attempting to map the extent of problem gambling in the community. They largely lack statistical validity, generally demonstrate that nothing much has changed, and systematically recruit too few ‘problem gamblers’ to allow statistical power to be brought to bear on analysis of the characteristics of the specific group. They do, however, purport to show that ‘only’ about one per cent of the adult population have problems. This is hugely useful to gambling industry interests, and to those state governments captured by them.

It has also been a massive money spinner for gambling researchers. Privately, no-one will admit that prevalence studies add anything to what we know about gambling harms, let alone help to develop preventive measures. Publicly, no-one will knock back a study worth anything from $500,000 and upwards.

‘Responsible gambling’, and its subsets such as the ‘Reno model’, argue for shared responsibility for prevention and minimization of problem gambling. They are rooted in notions of neo-liberal economic freedom and consumer sovereignty. In practice, they amount to half-baked ‘information provision’, adoption of ‘codes of conduct’ that are much more honored in the breach than in the observance, and a laissez-faire approach to regulation. Industry talks about being highly regulated. It isn’t. Most regulation is self-enforced, and the bigger operators appear able to get away with anything (as Pokie-leaks whistle-blowers have recently alleged).

Gambling researchers have, sadly, played a huge role in this. The annual conference of Australia’s gambling research community is attended and sponsored by major gambling industry players, and the event has been regularly held at casinos. The organisation that holds it (NAGS, the National Association for Gambling Studies) has multiple industry representatives on its board. NAGS and its annual conference are arguably about as independent as a Collingwood Football Club AGM. This has not served the cause of policy reform well.

However, there is significant evidence that this is changing.

For some years, researchers have been conducting a more and more urgent debate about the need for gambling research to acknowledge the need for disclosure of funding sources, rejection of funding and support from commercial vested interests, and adoption of an ethical framework that pursues public good rather than private advancement. That funding sources affect research outcomes has been disputed by some. Until recently, sources were not routinely disclosed. That is changing rapidly, as more and more academic journals recognize the issue (a recognition that pharmaceutical, alcohol policy, tobacco and other fields also took some time to achieve, it must be said).

In 2017, a large international research group meeting in Canada agreed that the issue needed to be formally addressed. Earlier this year, the group debated and generally endorsed a new code to address these issues. This is resisted in some circles, of course. But there is general agreement that involvement with industry incurs major reputational risks, not just for individuals, but for the field overall.

This is the core of the problem, of course. The evidence base for gambling reform is poor because of this influence. Industry funding has meant that endless prevalence studies take the place of research into preventive and harm minimization strategies that are much more likely to be effective. Public health initiatives in tobacco control and motor vehicle injury and mortality have been spectacularly effective. We know what sorts of activities will be effective. We don’t have the details as yet on how to implement these, mainly because industry has learned how to get in the way. It deploys a host of researchers who advance its non-agenda, pursue non-issues, answer non-questions, and obfuscate and argue about what we do know.

For policy to change, this must change, and the evidence suggests it is.

Better research for better policy

One major force addressing this has been the development of a new body of research focused on gambling harms, rather than the construct of ‘problem gambling’ and its non-boat-rocking sequelae. This work demonstrates that the effects of gambling extend far into the community, and that the costs involved are much greater than previously thought. It uses established epidemiological principles to enlarge understanding, and permits a much more accurate assessment of what it is that gambling does to communities and economies. The gambling industry would never fund this. Happily, the Victorian Responsible Gambling Foundation (a statutory body established by the Victorian government) did. It has also funded work on the effects on children of endless bookies advertising on TV sports broadcasts (hint: these are not exactly what every parent might want). It is relevant to disclose that the VRGF receives funds indirectly from the proceeds of pokie gambling. Its directions are determined by a board free of gambling industry influence.

Other research tendencies in gambling include adoption of sociological, political and economic perspectives, anthropological traditions and examination of the social structures that underpin gambling’s harm production capacity. This has been a development of some significance, and has caused rifts in the field.

Nonetheless, the European Research Council funded Prof. Rebecca Cassidy’s ground-breaking work on the way industry funding influences research outcomes. The Australian Gambling Research Centre (funded directly by the Australian Government) supported work to explain, in plain language, how poker machines work. Many researchers self-fund or derive research support from philanthropy or community organisations to explore links between gambling operators and political parties, what the structural characteristics poker machines actually do, and the extent to which regulatory decisions are influenced by spurious arguments around economic benefits. Claims of ‘community-benefits’ from gambling businesses have been shown to be hogwash. Anthropologists and public health researchers have gone into the belly of the gambling beast to observe its inner workings, and produced amazing accounts. All of this research is making itself felt. It is at the base of the change that is now perceptible in public.

Politics, politicians and the electorate.

The decision by the ALP in Tasmania to pledge to remove pokies from clubs and pubs at the expiry of existing arrangements in 2023 was a major departure from tradition. With the exception of the 2010 Wilkie-Gillard deal, such dissent has always been rapidly put down (and in Gillard’s case, even Labour’s final modest reform package was put down completely by the incoming LNP Minister, Keven Andrews. The means by which this has been achieved are rarely on display, and even more rarely remarked upon in general discourse. They were visible for a time in 2010-12, and have been brought into public view through the Tasmanian and SA elections. The sausage factory is not by and large, an edifying spectacle. The panic response of the Farrells and the THA suggests that the prospect of the house falling down around their ears was, indeed, a real possibility. As with ClubsNSW and their allies in 2010-12, they threw money at it, and it worked.

Some politicians, however, have been immune to this process of donations buying intelligence and influence and policy acquiescence, with promises of lucrative future employment or board positions guaranteeing continuation of business as usual. Andrew Wilkie, Nick Xenophon, the Greens, Jacqui Lambie and her colleagues and a surprising number of backbenchers from the major parties are deeply concerned about gambling harms.

Community groups concerned about gambling harms now proliferate, and enjoy significant support from philanthropy. Progressive souls (i.e., those who care about advancing community interests, and eliminating a major cause of poverty, crime, and violence against women) on both sides of the fence agree. Gambling is a big problem, and our politicians have let us down.

Established organisations are now expressing concern. The AFL Commission’s chair, Richard Goyder (also chair of the Geelong FC board) has made it clear he wants pokies out of the AFL. Eddie MacGuire, the ubiquitous Collingwood FC chair, has expressed a similar view, as have representatives of the Richmond and Footscray FCs.

Coles, a major operator of gambling venues, has been trying to introduce reduced maximum bets for some time (but has not been assisted by pokie manufacturers in this endeavor). They are now reportedly looking to get out of the business. Woolworths subsidiary ALH Pty Ltd, Australia’s biggest pokie operator, has got itself into hot water with revelations that it spied on customers and induced them to continue gambling against their own best interests. Their chair has indicated a willingness to see if they should continue in the business. And Crown, at the apex of Australia’s gambling hierarchy, has been rocked by whistleblower accusations around machine tampering, the facts of which have been verified by the Victorian regulator. Crown says it did nothing wrong. Penalties are reportedly being considered.

Taken collectively, this suggests that the way gambling is perceived, and the capacity of gambling interests to manipulate politicians, the media, and the electorate, has passed its zenith.

Is gambling reform possible?

Nothing in contemporary political life is certain, least of all policy outcomes that injure the financial interests of large corporations.

However, the struggle for effective tobacco control was a project spanning half a century. It is still far from over, although much of the structure for effective harm prevention and minimization has been established. The beginnings of a system to prevent and reduce gambling harm are being formed – some of these are sketched out in this essay. They are far from complete.

What is clear is that multiple Australian jurisdictions have acknowledged the harm that gambling does, and have effected regulatory and other changes that overtly address the cause of these harms. Further reform is a matter of building on these changes with more effective and better developed approaches. The rapidly developing reform of the gambling research filed will inevitably support this process, as it already is. By depriving industry-supported researchers of their credibility (a key tactic in the tobacco control armory) the endless obfuscation and mis-framing of gambling’s harmful trajectories will be disarmed.

Reform of the political donation system in Australia is a long overdue project. This will further reduce the capacity of cashed-up businesses like ClubsNSW and the AHA to throw their weight around in defense of their socially harmful businesses.

Change is coming. If Xenophon wins a sizable influence in South Australia on Saturday, it may come more quickly. But, if anything, the lesson of the period from 2010 onwards is that it generally takes a whole system (not a single individual or event) to take on powerful vested interests and produce significant, beneficial reform. The system is now forming, and multiple elements are in place. Change is coming.

Charles Livingstone is a gambling researcher with Monash University’s School of Public Health and Preventive Medicine. He has received funding from the Australian Research Council, the Victorian Responsible Gambling Foundation, the Independent Gambling Authority of South Australia, the (previous) Victorian Gambling Research Panel, and multiple non-Government and Local Government organisations, in Australia and from Canada, Finland, and New Zealand.

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