Government sets $55.3m problem gambling strategy

Internal Affairs Minister Chris Tremain and Associate Health Minister Peter Dunne today released details of the Government’s $55.3 million, three-year gambling harm strategy to be funded and implemented by the Health Ministry, and recouped from the gambling industry through the problem gambling levy.

“Essentially the problem gambling levy is a mechanism to recover the costs from the gambling industry as part of the Government’s continuing commitment to addressing the important issue of gambling harm,” Mr Tremain says.

Mr Dunne says a complex mix of data and information was analysed in coming up with the package.

“Among the many factors, officials looked at participation research, and the impacts of various forms of gambling; data from already funded problem gambling services, data on player expenditure on gambling, and – importantly – forecast future gambling expenditure,” he says.

The three-year package includes:

• $25.3 million for front-line intervention services to help people with gambling problems and others affected by those problems. This includes a range of services at a national, regional and local level, including dedicated Māori, Pacific, and Asian services, and helpline services.
• $20.5 million for public health services, particularly prevention activities encouraging safe gambling practices and raising awareness of the potential dangers of gambling. This includes awareness and education programmes and resources, funding a variety of community level activities across the country; working with gambling venues to promote safe gambling environments, and work encouraging organisations to adopt policies supporting reduction of gambling harm.
• $6.6 million for research and evaluation, including research to improve understanding of the impact of gambling on high-risk populations, and of risk and resiliency factors relating to the incidence of problem gambling. It also includes funding for an outcomes monitoring and reporting project to inform and support ongoing quality improvement in public health and intervention service delivery.

“This strategy to prevent and minimise gambling harm is the fourth. The first was developed in 2004,” Mr Tremain says.

“The process has also included an independent review by the Gambling Commission, which concluded that the strategy is ‘comprehensive, well thought out and targeted, while the costings demonstrate a willingness to operate within tight fiscal parameters’.

“The levy is staying about the same because there’s been no significant change to problem gambling data Indeed, there are fewer machines and gambling expenditure overall has fallen. In saying that, there is still an unmet need in gambling harm so no levy reduction was recommended,” he says.

Mr Dunne says the Government will recoup the funding required for the package of initiatives from the problem gambling levy – a levy on the profits of the main gambling operators.

The problem gambling levy is expected to recover about $33.35 million from non-casino gambling machines, $11.34 million from casinos, $5.38 million from the NZ Racing Board and $3.95 million from the NZ Lotteries Commission.

Regulations setting the levy will come into effect on 1 July 2013.

The strategy, Preventing and Minimising Gambling Harm: Three-year service plan and levy rates for 2013/14 to 2015/16, is available at www.health.govt.nz/publication/preventing-and-minimising-gambling-harm-three-year-service-plan-and-levy-rates-2013-14-2015-16

The regulatory impact statement can be found at:
www.health.govt.nz/about-ministry/legislation-and-regulation/regulatory-impact-statements/problem-gambling-levy-2013-14-2015-16

Problem Gambling Strategy and Levy – Questions & Answers

What is the total amount of the package?

Cabinet has agreed that the Ministry of Health should receive an appropriation of just over $55 million to implement and manage its integrated problem gambling strategy over the 2013/14 to 2015/16 period. This amount is similar to the amount appropriated in the current three-year period.

Does the fact that the problem gambling levy amount is about the same mean that problem gambling is at about the same level as in the past?

The levy remains about the same because there has not been any significant change to problem gambling data. The number of machines has decreased, expenditure overall is down and the most recent New Zealand health survey appeared to indicate a slight decline in prevalence. That said, there remains unmet need so no reduction has been recommended.

The overall funding required by the Ministry of Health has been about the same for the last two levy rounds from memory.

How does the Government recoup this funding?

The Gambling (Problem Gambling Levy) Regulations 2013 require gambling operators in each of the four main gambling sectors to pay a levy set at a different rate for each of the sectors. The levy is set as a percentage of player expenditure (after prizes are paid out) in each sector over the three-year period of the strategy.

The levy is intended to recover about $54 million over that time, taking into account a forecast over-recovery of just over $1 million in the current period. This is less than 1% of forecast player expenditure in these four sectors over the 2013/14 to 2015/16 period. Player expenditure, which is the same thing as the gambling operators’ gross profit, is expected to total over $6 billion over that three-year period.

What does the levy apply to?

The levy applies to the gross profits of non-casino gaming machines, the casinos, the New Zealand Lotteries Commission and the New Zealand Racing Board.

What are the levy rates for 2013/14 to 2015/16?

The levy rates are set out in the table below. As an example of the way the levy works, the rate of 1.31% for non-casino gaming machines means that gambling operators will be required to pay 1.31 cents in problem gambling levy for every dollar that they take out of their non-casino gaming machines over the 2013/14 to 2015/16 period.

What does a 10/90 weighting mean?

The Gambling Act 2003 sets out a formula that is used to set the levy for each levy-paying gambling sector. The amount that each sector is required to pay depends on that sector’s share of total player expenditure across the four sectors, and that sector’s share of the help-seeking (ie, “presentations” to problem gambling services) associated with gambling in those four sectors.

The 10/90 expenditure-to-presentations weighting (or, more strictly, the 0.1/0.9 expenditure-to-presentations weighting) put in place by the Regulations means a 10% weighting on player expenditure and a 90% weighting on presentations in the formula that determines the levy rate for each levy-paying sector.

This means that non-casino gaming machine operators will continue to pay by far the highest share of the levy. Harm is associated with non-casino gaming machines more often than with any other form of gambling.

How has the levy changed for the different gambling sectors, and why?

The 10/90 expenditure-to-presentations weighting has been used for all four sets of levy regulations to date.

The non-casino gaming machine sector is expected to pay less in 2013/14 to 2015/16 than in the current period, because its shares of both expenditure and presentations have decreased.

Casinos and the New Zealand Racing Board are expected to pay more in the 2013/14 to 2015/16 period than in the current period, because their shares of both player expenditure and presentations have increased.

Although the New Zealand Lotteries Commission’s share of expenditure has increased, it is expected to pay less in the next period than in the current period, because the overall levy requirement in 2013/14 to 2015/16 is a little lower and because 90% of the weighting is on presentations and its share of presentations is virtually unchanged.

Why did Ministers choose 10/90 instead of 30/70?

Cabinet agreed, on balance, to continue with the 10/90 weighting (10% on expenditure and 90% on presentations) that successive governments have approved for the previous three levies to date because this maintains a heavy weighting on presentations (help-seeking), which is the strongest indicator of harm. It also ensures that non-casino gaming machines, the sector with which harm is most often associated, continue paying close to two-thirds of the levy
What consultation took place?

There was wide consultation with key stakeholders, including problem gambling service providers, the gambling industry and researchers. The process also included an independent review by the Gambling Commission, which concluded that the Ministry of Health’s strategy is “comprehensive, well thought out and targeted, while the costings demonstrate a willingness to operate within tight fiscal parameters”.

When does the levy come into effect?

The levy comes into effect on 1 July 2013.

How do the strategy and the levy reflect the Government’s decision to grant SkyCity gambling concessions in return for SkyCity building and operating an International Convention Centre in Auckland?

There is likely to be some additional player expenditure once the additional machines and tables are operating. The concessions are due to come into effect when the convention centre building contract is signed. At this stage, it is unclear what the flow-on effect, if any, will be in terms of increased demand for gambling harm services. The Ministry of Health will continue monitoring presentations to its problem gambling services during the 2013/14 to 2015/16 period, and any issue would be address along with other relevant gambling harm concerns in the course of developing the strategy and levy for 2016/17 to 2018/19.

How have non-casino gaming machine numbers changed over the years?

The number of licensed non-casino gaming machines peaked at just over 25,000 on 30 June 2003, the last full quarter before the Gambling Act 2003 became law. The number has been falling since. The table below sets out the number as at 30 June, for each year from 2007 to 2012 inclusive. There were 17,542 non-casino gaming machines operating on approved venues as at 31 March 2013.