Thursday 21 February 2019

Richard Curran: Time for Paddy Power to spell out views on 'crack cocaine' gambling machines

Paddy Power’s founder warned the Irish government that their UK counterparts and vulnerable gamblers were addicted to Fixed Odds Betting Terminals
Paddy Power’s founder warned the Irish government that their UK counterparts and vulnerable gamblers were addicted to Fixed Odds Betting Terminals
Richard Curran

Richard Curran

Stewart Kenny, co-founder and former director of betting giant Paddy Power, really let the cat out of the bag when details emerged this week in the UK of what he said about Fixed Odds Betting Terminals.

These are basically betting machines in bookies in the UK that allow gamblers to wager £100 a go. They have proven highly controversial and some studies have suggested they are more addictive than other forms of gambling, leading to big losses and misery for problem gamblers.

Mr Kenny didn't make comments about the Fixed Odds Betting Terminals (FOBTs) in public or even in the UK. Rather, back in 2009, when he was still a non-executive director of Paddy Power, he made a submission to the Irish government which was considering a review of gambling and whether FOBTs should be allowed in Irish betting shops.

Mr Kenny is reported to have branded FOBTs as the "crack cocaine of gambling" - a phrase previously used by Labour politician Pat Rabbitte.

Mr Kenny went on to say there was no public demand for them, other than in the betting industry and they were "particularly enticing to younger gamblers in disadvantaged areas".

Referring to the experience in the UK, he said the British government was "as addicted to the tax revenue from the machines as vulnerable customers are to losing money in them".

He added they were in nobody's interest, neither betting shops nor wider society. The Irish government decided not to go ahead with allowing FOBTs to be installed in betting shops.

Board meetings at betting giant Paddy Power must be pretty unusual affairs. Mr Kenny appears to have made the submission in a private capacity, not as an official Paddy Power submission. He spoke honestly and his contribution may have been a factor in preventing these things from causing a lot more misery on this side of the Irish Sea.

But what did the rest of the board think? And what does the current board of the €10bn merged Paddy Power Betfair business think? They declined to comment this week when asked by an Irish Independent reporter.

Mr Kenny's comments placed the company in an usual position, given that it has 1,400 FOBTs in UK betting shops right now. It made €23m last year in its UK retail division and had this to say about gaming machines in its last annual report:

"Our UK machine gaming terminals carry the widest selection of games in the market and we now offer in-house developed games which also help to deliver consistency of exclusive content across online and retail channels." When Mr Kenny effectively lobbied against FOBTs coming here in 2009, the chairman of Paddy Power was Fintan Drury. A former PR executive. We don't know what Mr Drury's view of FOBTs was at that time.

It appears Paddy Power didn't lobby the Irish government to introduce FOBTs as some of its competitors did. Was this because it was making lots of money out of them in the UK, but could see the misery they could cause? Was it because the board was split on the merits or evils of FOBTs?

Mr Drury stepped down from Paddy Power in 2010 and appeared on a BBC Panorama TV programme on the subject earlier this year. He spoke out and accused the British government of "turning a blind eye" to widespread addiction caused by gambling machines. He said they were turning this blind eye because of the hundreds of millions of pounds the exchequer takes in every year from them. Last year the British exchequer bagged more than £400m from these machines.

"Despite irrefutable evidence of how much damage is being done to society, they support (government and the industry) each other in a manner that facilitates the addictive tendencies of hundreds of thousands of citizens. FOBTs work the streets and while government and the industry profit from them they stand accused of being their pimps," Mr Drury said.

These are very strong words and they would have carried a lot more weight if he had made them while he was chairman of Paddy Power. However, Mr Drury may have simply developed these views after he left in 2010 or felt that such problems were more a matter for government to fix.

It is extraordinary that two former directors of one of Europe's biggest gambling companies are more socially concerned than politicians are.

The fact that Paddy Power did not lobby the Irish government to introduce something that was making it lots of money in the UK, reflects a certain unease - perhaps even a feeling of corporate guilt. But if guilt was there, it wasn't sufficient to actually say anything publicly about it.

The clue lies in the rest of Stewart Kenny's submission from 2009. He went on to say that "once they (FOBTs) are in, it is impossible to get rid of them or even curb their more addictive elements".

Paddy Power would have had to take a social stand, remove highly profitable FOBTs which were totally legal under UK law, and hand over a massive advantage to their competitors.

It seems some in the group had reservations but may have felt they couldn't be expected to undermine shareholders' interests when politicians aren't bothered at all.

Does that mean the Paddy Power group is opposed to FOBTs continuing in the UK, as long as everybody gets rid of them or at least reducing the maximum stake to just £2?

Not quite. Paddy Power is a member of the Association of British Bookmakers (ABB). The association is likely to make a submission to a new review of FOBTs currently under way by the British sports minister.

However, the ABB outlined its position in a 76-page submission in a previous review in 2013 which refuted any evidence of a causal link between problem gambling and electronic gaming machines. It said it wasn't possible to single out some types of gambling activities as being specifically associated with problem gambling.

It rejected the comparison with "crack cocaine" saying these terms were "denigratory and misleading". "These pejorative terms are damaging to the perceptions of a legitimate and responsible leisure sector," the ABB said.

The ABB speaks for Paddy Power as it is a member along with bookmakers representing 80pc of the UK retail market. It noted that "most studies of gambling are marred by an anti-gambling bias, deriving from an obsessive focus on problem gambling".

It went on to quote from Basham and Luik's book 'Gambling - A Healthy Bet' (2011), which concluded there are numerous personal and social benefits.

British law restricts bookmakers to having a maximum of four FOBTs in any one betting shop. If they want eight, they have to open another shop.

Bookmakers in the UK have become utterly dependent on revenues from FOBTs. According to the ABB, reducing the maximum stake on a machine to £2 would put 90pc of betting shops and nearly 40,000 jobs at risk and cost the UK Treasury £650m in lost tax. Yet, it also tries to argue that the average spend on these machines is not nearly as high as critics suggest and is £11 per hour.

Perhaps it is time for Paddy Power Betfair to state directly what its views are in relation to gaming machines and how its analysis differs from that of its former director and co-founder, Mr Kenny and its former chairman, Mr Drury.

Equally, politicians have been asleep at the wheel on this issue on both sides of the Irish Sea.

In Ireland successive governments have failed society by allowing the industry to continue to be regulated by laws dating from the 1930 and 1950s. A Gambling Control Bill, published in 2013, which would introduce proper regulation of the sector here, has still not been enacted, despite full backing from betting companies, including Paddy Power.

Our politicians don't even have the excuse of being addicted to the exchequer revenues. They just don't seem to care at all.

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