Regulatory reform of Class 4 gambling

1. Regulatory reform of Class 4 gambling Presentation to the regional forums Joanna Gould and Ben Goodchild Policy Group May 2014

2. Introduction: Main points of discussion • The Department of Internal Affairs has been working to address key issues discussed in last year’s consultation document. • As a result, Cabinet has agreed to: • new regulations to increase the minimum rate of return and require localised return of net proceeds; • new legislation including a new Gambling Amendment Bill (No 3) and amendments to the Gambling Amendment Bill (No 2). • The Department has also undertaken a review of possible regulatory responses to prevent and minimise gambling harm.

3. Part 1: New Regulations - Increasing the minimum rate of return • The objective of reform is to maximise the proportion of funding returned to the community. • During public consultation, the majority of societies considered that an increase to 40% was achievable, though challenging. • Common society concerns included: • Societies may close low-turnover venues in order to meet the new minimum rate; • Overall returns to communities may decline; and • There may be increased competition for the scarce number of high-turnover venues.

4. Increasing the minimum rate of return (cont) • Cabinet has agreed to increase the rate of return from 37.12% to: • 40% in the 1stfinancial year after the regulations come into force; • 41% in the 3rd financial year after the regulations come into force; and • 42% in the 5th financial year after the regulations come into force.

5. Localised return of gambling proceeds • This objective of reform is to ensure that a significant proportion of GMP raised in a geographic area is distributed within that area. • During consultation, there was broad support for returning funds to where they were generated. • Cabinet has agreed that a minimum of 80% of net proceeds must be distributed in the same regional council area that generated them.

6. Localised return: Defining “local” Net Proceeds • The Department is considering two main options for defining local net proceeds • Option 1: Local GMP divided by the minimum rate of return (i.e. 80% of 40% of regional GMP is required to be distributed locally). • Example: A society raises $3 million in GMP in Auckland over the financial year. • Auckland’s minimum “local” return is $0.960 million (40% of $3 million x 0.8).

7. Localised return: Defining “local” Net Proceeds (cont.) • Option 2 (preferred): The distribution of net proceeds across the regions is dependent on the proportion of total GMP that is raised locally. • Example: a society raises $10 million in GMP nationwide, of which $3 million (30%) is raised in Auckland. • The societies distributes 45% of GMP ($4.5 million) in net proceeds to authorised purposes. • Auckland’s minimum “local” return is $1.08 million (30% of $4.5 million x 0.8).

8. Localised return: Other issues • How should it be determined whether net proceeds have been “distributed in the same area that generated them”? The regulations will require that a grant is, in the main, demonstrably for the benefit of the residents of the region • How long should a society have to distribute 80% of their net proceeds? Societies will be required to distribute 80% of their net proceeds locally during each financial year

9. Part 2: Gambling Amendment Bills • Cabinet has recently approved: • The tabling of a Supplementary Order Paper to the Gambling Amendment Bill (No 2); and • The introduction of a Gambling Amendment Bill (No 3).

10. SOP to the Gambling Amendment Bill (No 2) • The No 2 Bill makes mostly technical changes to the Gambling Act. • The SOP to the No 2 Bill proposes some further changes to clarify the intent of the Act, including: • Establishing that societies have ongoing obligations (e.g. minimising costs and maximising returns, and minimising the risks of problem gambling); • Clarifying that societies must incur only actual, reasonable and necessary costs; • Clarifying that the Secretary can suspend or cancel a licence for past, one-off breaches of the Act; and • Ensuring that the calculation of net proceeds bysocieties aligns with generally accepted accounting practice.

11. Gambling Amendment Bill (No 3) • The No 3 Bill makes a small number of important improvements to help fulfill the purposes of the Act. • The changes in the Bill aim to: • Reduce red tape by reforming venue payments; • Require more information on grant decisions and operational efficiency; • Strengthen the conflict of interest provisions; • Reduce compliance costs; and • Ensure the efficiency of the appeals process is not undermined.

12. Part 3: Preliminary review of Gambling Harm Prevention and Minimisation Regulations • The Department has undertaken a preliminary review of possible regulatory responses to prevent and minimise gambling harm. • The review followed the passing of the Gambling (Gambling Harm Reduction) Amendment Bill 2013 • The review analysed available evidence and research to assess whether there is a need to develop new regulations, or amend regulations already in place.

13. Results of investigation into Pre-commitment technology • Existing pre-commitment systems vary considerably across jurisdictions. • Often the more effective systems have been costly to implement. • The review found that there is potential for pre-commitment to provide benefits. • At this stage, further research is required to understand the benefits that pre-commitment could provide in a New Zealand context.

14. Current harm minimisation regulations and unused regulation-making powers • Research has been undertaken on the current regulations and their efficacy. • The Department will continue to monitor the evidence base to ensure the regulations are working as intended. • The Gambling Amendment Bill (No 2) has additional harm minimisation regulation-making powers that could be explored.

15. Questions? Comments?