The first report of the Parliamentary Joint Select Committee on Gambling Reform – titled “The design and implementation of a mandatory pre-commitment system for electronic gaming machines” – was released this morning.

The recommendations are “balanced, fair and progressive”, and will bring real benefits for those with serious gambling problems, says Dr Charles Livingstone, Deputy Head of the Department of Health Social Science at Monash University, and a member of the Australian Government’s Ministerial Expert Advisory Group on Gambling.

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A clever solution to Australia’s gambling problems

Dr Charles Livingstone writes:

The first report of the Parliamentary Joint Select Committee on Gambling reform (chaired by Independent MP Andrew Wilkie) has recommended a ‘hybrid’ approach to the reform of poker machine regulation. It calls for introduction of a mandatory pre-commitment system for existing poker machines, but would allow the introduction of a class of low-risk pokie games (maximum bets of $1 or less, and maximum prizes of $500 or less) exempt from pre-commitment.

In most Australian jurisdictions, poker machines can accept bets of $10 per spin, which can be repeated every 2 seconds or so, and have maximum prizes of up to $10,000 (more in the case of linked jackpots). These characteristics mean that the machines can, typically, consume up to $1,200 per hour. In NSW, patrons can insert $10,000 into a machine in one go.

Australia is almost unique in the world in permitting the saturation of local clubs and pubs with large numbers of such high impact games, and it is the combination of ubiquity and high impact that makes the current Australian situation so dangerous. And, in Australia, around 80% of gambling problems are associated with poker machines.

Most Australian don’t use pokies. Between a quarter and one third of adults may use pokies in any given year, but only about 600,000 use them regularly – weekly or more frequently. Amongst this group, the prevalence of gambling problems is enormous: 15% have a serious gambling problem, and another 15% have a ‘moderate’ problem, which will include serious emerging issues.

The harms of gambling include financial ruin, domestic upheaval including separation and divorce, neglect and abuse of children poor physical and mental health, crime, including fraud, theft and misappropriation, but also including increased rates of violence, unemployment and other significant labour force and employment impacts, and in extreme cases suicide.

This is not a trivial issue, as the gambling industry sometimes appears to suggest. The revenue from problem and at-risk gamblers going through pokies in Australia amounts to 60% of the $12 billion spent on pokies annually – a total of $7.2 billion, with $4.8 billion of it coming from serious problem gamblers.

The Wilkie report takes a more sophisticated approach than was originally envisaged to this problem.

Rather than requiring the installation of a pre-commitment system for all EGMs, the report recommends a system that would permit the high-risk group (those using the high-risk games regularly) to continue accessing those, but with the protection of a pre-commitment card. This would permit gamblers to select a limit and for the first time have that limit effectively enforced, by technical means.

Almost all the problem gamblers I’ve spoken to have told me they believe such a system would have been of invaluable importance to them when they were struggling to control their gambling. Even serious problem gamblers have lucid moments when they want to stop or better manage their gambling. Of course, once they’re in front of a machine, their determination dissolves. Pre-commitment will certainly help in such a situation.

It would also, for the first time, provide an effective form of self-exclusion – enabling people to stop using pokies if they wish, and to have their decision effectively enforced. Of course, problem or other regular gamblers may still access low-risk machines under the hybrid model. However, the capacity of such machines to inflict harm would be very much less than existing arrangements, and it is the harm producing capacity of pokies that is the target of the hybrid approach.

For low risk gamblers (the irregular, ‘entertainment’ style gamblers), unrestricted access to low-risk games would be available. For the most part they won’t even notice the difference. Research evidence strongly suggests that such games modify the gambling behaviour of high-risk players, but are not detected as different by low-risk gamblers.

The intermittent, low-risk user who enjoys some entertainment time on a pokie won’t be affected at all, although the characteristics inherent to such low-risk games means that they are more likely to experience more time on the machine for their money, a by-product of the reduction in game ‘volatility’ associated with reducing the bet and prize size.

Volatility is a by-product of poker machine game maths, whereby a very small number of relatively large prizes skew the distribution of game outcomes significantly, which means that people frequently get very little time on the game for their money. Volatility appears to be an important risk factor for gambling harm. Low-risk games, apart from limiting expenditures, will also be less volatile.

Thus, the Wilkie report promises a targeted solution to Australia’s gambling problems, and explicitly endorses a contemporary, upstream public health approach.

Industry has claimed that the solution will be costly, ineffective, and intrusive. Depending on the nature of the solution adopted (there are several options) the cost is likely to be in the range of $2,000 per machine, $400 million in total if all of Australia’s 200,000 machines become compliant. Industry has suggested it will be up to $3 billion for a fully networked model, but, as the Wilkie report argues, this is less than a single year’s revenue from problem gamblers.

Pre-commitment has also been trialled in two Australian states, and in a number of overseas jurisdictions, and is not only technically feasible but has already demonstrated significant benefits. Low impact machines are deployed in a number of jurisdictions.

The evidence from Britain, where, although gambling de-regulation has been comprehensive, slot machines remain subject to limits on numbers, location, and bet and prize limits, indicates that slots are no more likely to cause gambling problems than any other form of gambling. And, although the prevalence of gambling problems has risen slightly in the wake of deregulation, it remains well below Australia’s.

It should also be clear that low-risk games would not require any change in the entertainment offered to people who enjoy the occasional use of a pokie. A smartcard system, as proposed by the Wilkie report, would be about as intrusive as the use of credit or EFTPOS card is, or a loyalty club card, or for that matter a library card. To suggest that a pokie pre-commitment would be intrusive is, to put it mildly, disingenuous.

And the Wilkie report allows large clubs and pubs until 2014 to become compliant, and recommends that smaller venues (those with 15 pokies or less) would have until 2018 to do so. This is not an onerous timetable.

Overall, the Wilkie report is balanced, fair and progressive. It will bring about significant reforms to the pokie business, and provide real benefits for people experiencing problems with pokie gambling. It may result in a loss of revenue for some venues – particularly those relying excessively on pokie revenues, and in particular on those relying on problem gamblers.

If implemented, the reforms would permit the club and pub industry to claim, with justification, that they’re doing everything possible to ensure that pokie gambling is enjoyable and safe. They certainly can’t make that claim now.

• See Dr Livingstone’s previous Croakey post

• The Public Health Association of Australia policy statements on Gambling and Health, and Gambling Industry Funding, are here.

• The PM’s preliminary response to the report.

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Update, May 10

More analysis from the Parliamentary Library’s FlagPost blog

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Update, May 11

According to this report in The Economist, Australians really are the biggest losers.