13 Dec 2004

The Dept. of Internal Affairs has issued a panui in response to the Charity Gaming Association (CGA) campaign against new rules limiting how much pubs can be paid to operate gaming machines. The CGA says that if pubs are paid less, there will be less money available for the community because some pubs will reduce the hours of operation for gaming machines.

The CGA has presented no evidence to support this claim.

The Department of Internal Affairs welcomes public debate and has produced the following fact sheet to ensure the debate is well informed.

For further information visit the Department’s website, www.dia.govt.nz _________________________________________

Pokies are meant to raise funds for the community

Gaming machines are licensed to operate in pubs and clubs only as a form of community fund raising. Machines in pubs are owned by gaming machine societies who pay the pubs to host their machines. Those societies operating machines in pubs must pay their profits to the community.

At 30 September 2004 there were 17581 gaming machines, owned by 101 societies, operating in 1365 pubs.

The real issue is how much of gamblers $1 billion+ gaming machine losses should gambling operators keep for themselves and how much should go to the community?

The following table shows the Gambling Operators profits (GOP) in recent years:

Year to 30 June 2002 GOP = $777M

Year to 30 June 2003 GOP = $941M

Year to 30 June 2004 GOP = $1.03B

What does the Department think about the Charity Gaming Association’s position?

The Charity Gaming Association (CGA) asserts that grants will fall because total gambling losses throughout the community will fall.

The Department believes this is pure speculation. Even if the total amount of gambling losses from pokies falls, there could still be more money available for the community because the amount paid to pubs would be lower. A fall in gambling losses would be against the trend of losses increasing significantly every year since gaming machines were licensed.

If individual pubs decide to cut back their own number of machines or hours of operation, market demand means other operators will fill the gap providing the level of access to machines required by the public.

Gambling Inspectors have repeatedly found that, when gambling licences were suspended or cancelled for breaches of rules, gamblers simply went to other venues.

This is also likely to be the case if a particular venue reduces access to its machines because of the new rules. It is unlikely that there will be any overall reduction in gambling losses.

Even one of the CGA’s members, the Southern Trust, conceded there is little evidence to support the CGA’s claims and that they could be seen as scare mongering (Sunday Star Times, 28 November 2004).

What do the new rules and regulations mean for you?

The new rules aim to ensure that a higher proportion of gambling profits is returned to community organisations. The rules will also limit how much of the $1 billion+ gambling operators take as costs.

• Overall, pubs would be paid up to $128 million a year, down from $160 million under the previous scheme. The difference, $32 million, should be available as additional grants to the community even if the level of gambling losses does not change.

• Societies would be paid up to $136 million a year - the new venue expenses rules do not change what societies can keep for their own costs.

This totals $264 million a year

• As of 1 December 2005, payments to pubs will be capped at 16% of each society’s gross profit (this was about 20% under the previous scheme and didn’t include some of the costs that will be covered by the cap).

• All pubs will be paid the costs to operate the machines plus a margin. If they operate their machines for longer, they are paid more. If they operate the machines for a shorter time, they are paid less.

• There is huge flexibility in the system, with potential payments to pubs ranging from $0 to more than $200,000. Under the previous rules this range was from $0 to $468,000 a year.

• Example: Under the new rules, a pub with 18 machines operating from 10am to 10pm could be paid up to $158,974.40 a year.

• Under the old rules, about 150 pubs had a dispensation to be paid more than the new maximum limit. This is money that pubs used to keep, that will now be available for the community.

How are payments to pubs and clubs calculated? Previous payments were linked to profits from the machines at each venue (commissions). The High Court ruled this was illegal under the Gaming and Lotteries Act. Parliament considered commissions under the new law, the Gambling Act, and decided to explicitly ban them.

Independent, professional accountants, whose work in the gambling sector has previously been accepted by the High Court, used information from pubs and societies and reported on the actual costs. There was extensive consultation with the gambling sector, which included providing the sector with the accountants’ report.

The current policy is based on what it actually costs to operate gaming machines. The Department of Internal Affairs then added in a margin for regional variations in costs and for management fees for pubs.