Jowell Comments on Gaming Concerns - Code of Practice among Them

Tessa Jowell, secretary for the U.K. Department for Culture, Media and Sport (DCMS), this week provided further information on the upcoming international summit her department intends to host on the subject of online gambling. Among the topics of discussion will be the development of an international industry-wide code of practice.

The DCMS revealed in January of 2006 that it hoped to bring regulators and policymakers from around the world together to discuss common problems and possible solutions, but at the time date and agenda planning had been in very early stages.

Jowell recently told the Financial Times that the summit will probably take place in October and that the agenda will include discussion around trying to develop a new international code of practice for jurisdictions that license and regulate online gambling.

Such a code of practice would include provisions such as the requirement of age and identity checks and mechanisms to ensure fairness and problem gambling awareness. Invitations are sure to be extended to the regulatory authorities of I-gaming jurisdictions like Gibraltar, Alderney, the Isle of Man, Costa Rica, Antigua and Kahnawake, as well to the governments of larger nations that are attempting a broad range of different approaches to online gambling, including Australia, South Africa, New Zealand and the United States. Jowell verified that members of the International Monetary Fund and the World Trade Organization will be invited as well.

Jowell recognizes, however, that it could be difficult to get jurisdictions that may already be pleased with their method of regulation to comply with a code that could impose more rigorous requirements on their operators. "I don't pretend that it will be easy or straightforward to put together an agreement," she stated.

Meanwhile, England's new Gambling Commission continues its progress toward ushering in the new gambling regime dictated by the Gambling Act 2005. Some of the new regulations for the traditional bricks-and-mortar establishments have already taken effect, and the Act is slated to come into full force in September 2007.

An important part of the regulatory system remains incomplete for online gambling operations, however, because the tax rate for such operations has yet to be decided. Chancellor Gordon Brown is responsible for setting the tax regime, but he is not expected to declare it until he delivers the 2007 budget in the early part of the next year.

The tax regime is a crucial consideration for the United Kingdom and potential licensees because if the rate is too high operators may be unwilling to migrate from their current jurisdictions.

Jowell would not comment to the Financial Times about what sort of tax level would be appropriate because it is "obviously a matter for the Treasury," but she did state, "I hope we'll see a significant number of applications. There are reputational advantages in being U.K.-licensed, U.K.-based, U.K. taxpaying and complying with U.K. regulations."

On Wednesday Jowell delivered one of the keynote addresses at the 10th annual Lottery Monitor conference in London, where she revealed a plan whereby National Lottery players would be able to select which charities benefit from the proceeds of their lottery purchases. Implementation will begin in August through two pilot schemes in two different parts of the United Kingdom, neither of which has been disclosed yet.

Apparently players in the two test areas will be able to tick a box to select which of five local charities they would like their funds to support. Early reports are that the five charities will compete for grants of up to £50,000 (US$92,000), but the dynamics of the system remain unclear for the moment.

"The National Lottery is not just great fun for players, it is a major funder of good causes in the UK-- £16.6 billion ($30.6 billion) to date," Jowell said. "The National Lottery also has the overwhelming support of the general public. It is vital that the public feel that they have a genuine sense of ownership of the National Lottery and real power to shape decisions and influence outcomes."

The tick box scheme for the National Lottery seeks to accomplish what was supposed to be one of the main selling points for Chariot (UK) Plc's Internet-based lottery, Monday. Chariot launched Monday in April of 2006, proposing to let players choose which of five separate lotteries they would participate in each week, with each lottery benefiting a different charity. The company also proposed to donate a higher percentage of funds than the National Lottery and to offer better odds (but lower payouts) to customers.

Dissatisfaction with how funds are allocated is one of the most common complaints about Britain's National Lottery system. In August 2003 a white paper commissioned by the DCMS identified flawed funding distribution as one of the main reasons for a decline in ticket sales. Questionable funding choices in recent years include a £628 million ($1.159 billion) grant to the failed Millenium Dome in London and £270,000 ($498 million) to help farmers in Peru breed larger guinea pigs. Most recently it emerged in April that lottery funds were being used to teach accountants salsa dancing and to provide a private gym for staff at Manchester United, which is the second richest football club in the world.

Despite its seemingly gracious plan for charities, Chariot revealed only four weeks into its operation of Monday that ticket sales were significantly lower than anticipated. The company consequently revised its business plan, reshuffled its board of directors, and launched a £2.6 million ($4.8 million) rescue plan, the success of which cannot yet be determined.

While Chariot's attempt to give players the ability to choose which charities benefited from ticket sales involved an entirely new lottery game, the firmly-established National Lottery already enjoys a massive amount of ticket sales and should therefore not be vulnerable to the same shortcomings.

Liberal Democrat culture spokesperson Don Foster has praised the plan, stating that he welcomed "this guarantee that lottery funding for arts, heritage, sport and charities will not be further undermined," and stating that "Greater public involvement-- correctly implemented-- could further safeguard lottery expenditure."

He did add that caveat however that "The government's tick box plans must truly promote informed participation and be proven as more than a cloak of democratic legitimacy hiding Labour's slow takeover of lottery funds."