Resource material › Regulatory Impact Statements › Problem Gambling Levy 2007-2010

April 2008

Regulatory Impact Statement

Nature and magnitude of the problem and the need for government action

Two prevalence surveys (in 1999 and 2002/03) have indicated that about 1.5% of New Zealand’s adult population are problem gamblers. These figures are considered to be conservative. Moreover, researchers estimate that at least 5 other people are affected by a gambler’s serious problem gambling. Problem gambling affects some communities and some socio-economic groups more than others, and aggravates health inequalities. The Gambling Act 2003 acknowledges that it is a significant public health issue.

The Ministry of Health is required to develop an integrated problem gambling strategy including measures to promote public health by preventing and minimising the harm from problem gambling; services to treat and assist problem gamblers and their families and whanau; independent scientific research associated with gambling; and evaluation.

Regulations are needed so that the Crown can recover the full cost of the strategy. The problem gambling levy (paid by non-casino gaming machine and casino operators, the Racing Board and the Lotteries Commission) must be set at least every 3 years. The current 3-year funding plan and levy expire on 30 June 2007.

The proposed funding from the levy is $64.899 million (GST excl.) over the 2007/08 to 2009/10 period. This is made up of $55.854 million for the Ministry of Health’s service plan plus a forecast net under-recovery of $9.045 million from the current levy period.

Because the levy rates are in part based on forecasts of future player expenditure and the gambling sector is highly volatile, it is inevitable that the levy will not collect exactly the amount intended. The Gambling Act provides that any under-recovery or over-recovery should be included in the calculation for the next 3-year period. The forecast $9.045 million net under-recovery in the current period takes into account both $1.45 million that was appropriated to the Ministry of Health but not spent, and over-recoveries and under-recoveries across the four gambling subsectors that pay the levy. The total forecast net under-recovery is almost entirely due to an unanticipated decline in non-casino gaming machine expenditure from January 2005. There are some early signs that this expenditure may now be starting to grow again.

Public policy objective(s)

The main objective is to ensure that the Crown is reimbursed for the costs of the problem gambling strategy, through full cost recovery mechanisms, as anticipated by the Gambling Act. This will contribute to meeting the key objectives of the Act, which include preventing and minimising the harm from gambling, including problem gambling.

Feasible options (regulatory and/or non-regulatory) that may constitute viable means for achieving the desired objective(s) and Statement of the net benefits of the proposal, including the total regulatory costs (administrative, compliance and economic costs) and benefits (including non-quantifiable benefits) of the proposal, and other feasible options

The options presented below anticipate that the cost of the Ministry of Health’s service plan and the forecast net under-recovery from the current period will be recovered in full from a levy on the four main gambling subsectors, as anticipated by the Gambling Act.

The levy formula in the Gambling Act 2003 provides for weightings to be given to the proportion of player losses attributable to each gambling subsector, and to the proportion of presentations to problem gambling treatment services attributable to each gambling subsector, in order to determine how much each gambling subsector should pay. The strategy addresses gambling-related harm. Therefore, it is appropriate that a very high weighting be accorded to presentations to problem gambling services. The two options advanced for that factor are weightings of 90% or 80%.

The following table shows the estimated level of contributions for 2007/08 to 2009/10 using the two alternative weightings (including full recovery of the forecast net under-recovered levy). While the figures are GST exclusive, they do not exactly add up to the levy amount of $64.899 million (GST excl.) due to the impact of rounding.

Comparison of 2004/05 to 2006/07 levy amounts with proposed levy for 2007/08 to 2009/10

Gambling Subsector	2004/05 to 2006/07 levy 10:90 weighting ($ M)		Forecast Player expenditure 2007/08 to 2009/10 ($M)	Proposed 2007 -2010 levy ($ M)
	Forecast levy	Likely amount recovered		10:90 weighting	20:80 weighting
Non Casino Gaming Machines	37.44	27.47	2,718	46.21	44.31
Casinos	7.98	6.90	1,699	12.23	12.57
NZ Racing Board	3.37	3.63	823	4.52	4.85
NZ Lotteries Commission	0.96	1.25	1,022	2.04	2.96
Total	49.75	39.25	6,262	65.01	64.70

In 2004/05 to 2006/07, the Ministry of Health’s appropriation increased each year to allow for the development of the service plan from a relatively low base. The proposed amount of the levy in 2007/08 to 2009/10 is essentially a continuation of the 2006/07 funding, plus the net under-recovery from the current period. The Ministry of Health’s needs assessment and service plan indicate why that level of funding is required.

Government

The proposed levy ensures that the Crown is reimbursed for services provided by the Ministry of Health. The proposal is fiscally-neutral over time. Internal Affairs’ and Inland Revenue’s information provision costs will be met from existing Vote funding.

Gambling Sector

The Ministry’s costs of developing, managing and delivering a problem gambling strategy will fall on the four main subsectors of the gambling industry:

• 400 to 500 non-casino gaming machine operators (corporate societies including charitable trusts, clubs and RSAs)
• 6 casinos
• the New Zealand Racing Board and
• the New Zealand Lotteries Commission.

The impact of the levy on each gambling subsector is, in part, determined by the weighting specified in the regulations. The higher the weighting placed on presentations, the higher the amount of levy that must be paid by the non-casino gaming machine subsector. The higher the weighting placed on player losses, the higher the amount of levy that must be paid by the casinos, the New Zealand Racing Board and the New Zealand Lotteries Commission.

The Department of Internal Affairs will provide information to licensed gambling operators about the levy and when the payment obligation begins. In addition, Inland Revenue Department educational material and forms will advise gambling operators how to calculate the appropriate levies (that is, calculated at x% of player losses). Gambling operators will include a cheque for the levies along with the monthly returns for duties that they are already required to make under the Gaming Duties Act. On-line filing of combined gaming duty/problem gambling levy returns is also available.

Society

In the year to December 2005, 4,010 people presented for face-to-face intervention services for problem gambling. While this a decline of 15.8% on the previous year, it is generally accepted that only 10% to 15% of New Zealand’s problem gamblers currently seek help from problem gambling services. Moreover, this drop in help-seeking coincided with a decline in non-casino gaming machine expenditure, and there are some early signs that this expenditure may now be starting to grow again.

The 2006 Ministry of Health needs assessment highlights several groups that disproportionately experience harm from gambling. Maori and Pacific peoples are significant in this respect as are populations in areas of high deprivation. Service access data also suggests that some Asian communities are at elevated risk. Given the high exposure to gambling in high-deprivation communities, there is concern about the impact of gambling on these communities and Maori and Pacific peoples specifically.

It is not expected that the adoption of either weighting option will have a significant impact on the amount of money available for distribution to the community, although it may have an impact on which community purposes will benefit. Continuing a 10:90 weighting would mean approximately $1.9 million less for the non-casino gaming machine subsector to allocate to the community than under a 20:80 weighting. However, this would largely be balanced by the Lottery Grants Board having $0.92 million more to distribute and the New Zealand Racing Board having $0.33 million more to distribute to racing than under a 20:80 weighting. Moving to a 20:80 weighting would mean the reverse would be true i.e. the non-casino gaming machine subsector would have $1.9 million more to return to the community but the Lottery Grants Board and the New Zealand Racing Board would have $0.92 million and $0.33 million less respectively.

Statement of consultation undertaken

Stakeholder consultation

The Ministry consulted on its strategy with gambling operators, treatment providers and other groups significantly affected, through a targeted mail-out of information. 56 written submissions were received and a further 923 duplicate letters. Seven separate consultation meetings were held around the country (including one meeting for gambling sector representatives and one for representatives of government agencies).

As required by the Gambling Act, the Gambling Commission then facilitated a meeting with representatives of gambling operators, problem gambling service providers, the Ministry of Health and the Department of Internal Affairs, to consider a revised plan. It then prepared a report to the responsible Ministers making recommendations on the amount of the levy and the levy rates for the gambling sectors.

The submissions demonstrated divergent perspectives between service providers and gambling operators, particularly around the extent of problem gambling, the funding needed and the approach that should be taken. Service providers generally raised concerns about the adequacy of resources, while gambling operators raised concerns about costs and over-capacity in treatment services. Both service providers and gambling operators expressed doubts about the quality of data and the adequacy of resources for contract management, monitoring and research.

In response, the Gambling Commission recommended removal of the $2.313 million contingency fund for psychosocial intervention services. It considered that there is sufficient scope in the interventions services budget to meet any increase in demand. In addition to its formal levy recommendations, the Commission identified a number of areas where there may be scope for greater cost efficiency and where adjustments to funding levels could be made. Ministry of Health and Department of Internal Affairs officials will consider these issues during implementation and evaluation of the strategy.

As a result of this consultation, the proposed service plan is significantly different from the draft document that went out for public consultation. Major revisions are as follows:

• The total service plan funding over the three year period has decreased from $61.097 million (GST exclusive) to $55.854 million (GST exclusive).
• In particular, there is a 15% decrease in psychosocial intervention services funding (from $34.519 million to $28.985 million) to reflect the recent reduction in service use. The proposed funding level will allow for continued development of services with an increased focus on screening and brief and early interventions.
• Overall funding for public health services has increased by $127,000, to better track the impact of the social marketing programme through the behaviour change indicators survey.
• Total research funding has decreased from $6.75 million to $5.8 million in the revised service plan. This reflects the socioeconomic impact study being deferred to a later levy period, a reduction in scale for the clinical trial, and funding for the gaming survey being increased from $600,000 to $800,000.
• Expenditure on public health and mental health operating funding has increased in 2007/08 from a total of $720,000 to $950,000 with funding then increasing by 3% each year. This allows more resources for contract management, monitoring, data analysis, aligning the problem gambling information system with Ministry databases, review of the strategic plan and aligning services to other health areas.Government Departments/Agencies Consultation

The following Government departments and agencies were consulted in the preparation of this paper: The Ministry for Culture and Heritage, Ministry of Economic Development, Inland Revenue Department, Ministry of Pacific Island Affairs, Department of the Prime Minister and Cabinet, Ministry of Social Development, SPARC, Te Puni Kokiri, Treasury, Ministry of Women’s Affairs and the Ministry of Youth Development.

In addition, a specific meeting of government departments and agencies was conducted during the draft strategy’s consultation phase to provide information about the strategy and receive feedback. No concerns were expressed.