Tuesday, September 11, 2007

Hokey Pokey & the Labor Party

The Four Corners show ‘Hokey Pokie’ dealing with the NSW poker machine industry did not teach me much that was new about the economic impacts of gambling – the full video is online here. Most problem gambling (around 85%) centres on the pokies which in turn comprise about 80% of total gambling. Pokies are overwhelmingly concentrated in poor areas – in Sydney in the South and South West with almost none on the prosperous north shore.

As in Victoria the pokies are concentrated among working people who least can afford gambling losses. It is a scandal for such an industry to be promoted so strongly around Australia by a political party that calls itself ‘Labor’.

I was interested in the politics of the spread of the machines. They were initially given to the clubs to help them raise money for sporting and cultural activities. The pubs then claimed that the clubs were providing subsidised food and booze to patrons which would drive the pubs into bankruptcy unless they were also given pokies. Hence Labor gave them to the pubs turning every suburban pub into a mini-casino which anyone could patronise. The emergent epidemic of problem gambling then forced the NSW government into putting a cap – at around 100,000 – on the total number of machines in NSW. This still gave NSW about the world’s highest incidence of machines – in aggregate greater than in the rest of Australia combined.

The pubs and clubs complained about constraints on growth so the government introduced a trading scheme whereby machines could be sold from low-use locations in the country to high-use locations in city-based working class suburbs. The machines could be traded three at a time but one out of the three had to be returned to the government for each two sold. This has led to a reduction in 3000 in machine numbers but growth in total amounts gambled has risen strongly because of greater machine use efficiency. Having sold off their low-patronage machines the country pubs are dying. It is a total mess.

I also learnt from the show about the existence of a ‘new’ (it was in fact 2006!) NSW Government Report on gambling which adds to the Productivity Commission’s work on gambling in Australia. Charles Livingstone critiques this NSW report and makes interesting observations on the psychology of poker machine gambling. The NSW study was a low budget survey of 2010 people that screened for problem gambling using the Canadian Problem Gambling Index (CPGI). To summarise the key conclusions:


  • 69% of NSW people aged 18+ gambled at least once over the past year. 0.8% were problem gamblers (gamble at least once a week and have experienced real problems), 1.6% were moderate risk gamblers (once a week and may have experienced problems) and 2.1% were low risk gamblers (once a week and at risk of experiencing problems but currently not). Therefore, in aggregate, 5% of the gambling population were ‘at risk’.
  • Pokies pose most gambling risks with 95% of problem gamblers and 85% of moderate risk gamblers using pokies.
  • There are significant gambling problems with young male gamblers with 18-24 year olds constituting 34.3% of all ‘at risk’ gamblers compared to 4.5% of the total population. I noticed the same myself during my reconnoitring of Crown Casino in Melbourne.
The NSW Labor Government seems to take gambling issues lightly – the club and pub industry seems to drive the views of politicians. And what a weasel the Minister for Gaming & Racing in NSW, Graham West seems to be.

In the show he seemed lacking in conviction and unappreciative of the dimensions of the problem. The epitome of an aspiring young Laborite politician! He will go far!

West seemed to want to do all he could to delay action on the industry. He sees the 2006 NSW study as the start of a series of scientific studies. What about the 1999 Productivity Commission study and the flood of studies over the years? This is a move to procrastinate, at low cost, not to get the facts as he suggests.

The machines were introduced in NSW in 1957, Mr. West, not last year!

I was pleased to see that Labor’s Kevin Rudd has strong views on the pokies. Rudd looks like being our next Australian Prime Minister and will face 6 State and 2 Territory governments (all Labor) and all to a greater or less extent addicted to revenue from the pokies. Rudd is in a unique position to take action against the pokie evil. It is smart politics too – most Australians do not like pokies – see here for evidence of public support in Victoria for cutting pokie numbers and national polling data here .

According to The Australian this morning:


‘KEVIN Rudd has criticised state Labor governments for hurting Australian families with their over-reliance on poker machine taxes, vowing to come up with solutions to wean states off the addiction if he wins the federal election….

Mr Rudd, who as chief of staff to former Queensland premier Wayne Goss oversaw the introduction of poker machines in Queensland clubs from 1989, said he was concerned states were now over-dependent on the revenue.

"I hate poker machines and I know something of their impact on families," Mr Rudd said. "I have spoken at length with (World Vision chief executive and welfare
activist) Tim Costello on this."

A study by the Australian National University's Centre for Gambling Research found the states collected about $4 billion in gaming taxes in 2005. It found gaming taxes contributed about 12% of state revenue collection. In Mr Rudd's home state of Queensland, revenue from gaming machines has increased 47 per cent from $375 million in 2002-03 to $550 million in 2006-07.

He said he had no magic solution but if elected would enlist Mr Costello - the brother of federal Treasurer Peter Costello - and others to work on measuring the real social impact of gaming addiction. He would then work on policy solutions to help states overcome their addiction to poker machines’.

"This is a matter of continued policy interest to me," Mr Rudd said. "I think the social impact is significant, hard to quantify but it's significant. It's of sufficient concern to me for this not to just drop off the radar."

Promising signs as Rudd at least (implicitly) admits his past actions in Queensland were wrong. But no more studies please Kevin as there have already been plenty already. We already know 'the real social costs' of gambling.

If Rudd is elected I will remind him of the statements above.


13 comments:

robert merkel said...

I agree with you on the damage that pokies do, but the question arises - what to do about them? How do we unscramble the egg?

For instance, where will state governments replace the revenue from? What about, say, the rugby league competition, whose clubs are very dependent on pokies revenue as I understand it?

hc said...

Robert, My understanding is that Kevin Rudd is looking at alternative revenue sources for State Governments.

The clubs are being funded now by their 'problem gambler' members. I think broaden the base of the funding arrangements so the cost of facilities is borne by all members.

My own preference is to gradually eliminate pokies entirely - this needs to be done gradually. I agree it is not easy but (i) hefty enough taxes might be introduced and (ii) a strong publicity campaign opposing use - warning of extreme addiction dangers, might be employed so their market value is reduced and then a buyback.

Of course no more machine licences issued.

This might not be practical and more limited reforms are possible such as redesigning the machines to make them less addictive (the 'extreme' machines used in pubs in Australia are designed for US casinos) with stricter gambling limits, conditions for registration and recording of use.

Better possibilities for self-exclusion also useful.

I'll post in the future on these. Generally my view is that the NSW obsession in dealing with 'problem gamblers' is misplaced since a new generation of gamblers arrives each year. The structural problem needs to be addressed - a highly addictive form of gambling has been introduced which is harming too many people.

Jacques Chester said...

The easiest way to force the hand of the states would be to hold back GST revenues dollar for dollar.

hc said...

Jacques, That could be met by the states cutting their tax take which is not what you want if you seek to restrict gambling. You want them to levy heavy taxes to cut gambling.

taust said...

Being lazy I ask the question what is the comparison for say, percentage of people at risk and cost between gambling and alcohol and all other chemicals of addiction?

kymbos said...

Good summary, Harry. I think the problem with the report was the almost complete failure to discuss solutions. Contrary to conventional wisdom, I believe the solution to pokie problem gambling has been found, mostly due to the work of Professor Mark Dickerson in Sydney.

His approach is that gamblers lose control of their decision-making capacities when 'in the zone', and then make poor decisions. The solution is to require all gamblers to make the financial decision on how much to gamble before their gambling session. This is possible using 'smart technology' which has been used successfully in Nova Scotia.

Smart technology was first tried with 'loyalty cards' in casinos, where a gambler is identified individually and receives rewards for gambling. It is now readily available with 'USB' sticks with thumbprint technology, so that users can't get multiple cards and circumvent the system.

The system would require each gambler to get a USB stick to gamble, and before they start they must decide how much they are willing to lose each day, week, month and possibly year. Once they hit their limit they must stop. If they want to raise their limit, they can, but must wait 48 hours for it to come into effect - this stops poor decisions while 'in the zone'. It's simple and logically very effective.

I will put a link to Dickerson's work below.

http://www.austgamingcouncil.org.au/images/pdf/eLibrary/1557.pdf

kymbos said...

I couldn't get the link to work. If you're interested, type in "What if there were no problem gamblers?" into Google.

The other benefit of this system is that gamblers help themselves by choosing their own pre-commitment level, without Big Brother forcing their behaviour.

kym_whiteoak said...
This comment has been removed by the author.
kymbos said...

sorry to bombard you, but here is a brief discussion of smart technology including gambling possibilities:

http://www.economics.com.au/?p=1030

hc said...

Kymbos, This is an interesting proposal that tacles 'within-session' self-control problems.

Thanks.

kymbos said...

The Federal level would be a good place to act on problem gambling, as they can focus on reducing harm while not being conflicted by gambling revenue.

There would be useful synergies for a national smart technology regime as well. Wherever you go, take your USB stick if you want to gamble. It could also be used in casinos Australia-wide, in that case.

Stephen Lloyd said...

I don't hold much hope of Kevin Rudd doing anything about it. He was just after the headline. He hasn't actually outlined what he is going to do about it.

As Andrew Bolt states:

Meet Kevin Rudd, the amazing ventriloquist’s doll. You say it here, and, wow, the doll then says it there.

Has there ever been an Opposition Leader who so scripts his statements to echo whatever was in the mind of the voters his pollsters last quizzed?

[...]

Same story yesterday. Rudd got more headlines with his promise to tackle the wicked pokies, which you and I tell pollsters like his we loathe.

“I hate poker machines,” says Rudd. Hey! Just what I said, too!

“I think the social impact is significant,” says Rudd. I hear you, brother! And your plans?

“It’s of sufficient concern to me for this not to just drop off the radar.”

Got it! Got it! And you’ll do . . . what?

Ah, but you haven’t got it, really. It’s enough for Rudd that he just talks about it. As for doing something about what’s actually the states’ mess, here’s The Australian’s report on his “plan”: “He said he had no magic solution but if elected would enlist (World Vision boss Tim) Costello—the brother of federal Treasurer Peter Costello—and others to work on measuring the real social impact of gaming addiction.”

No substance. All spin.

kymbos said...

I don't disagree with you, Stephen, but ol' Kev would not be the first politician to proclaim an interest in addressing gambling harm and not come through with the goods.

Research is coming thick and fast on gambling issues, all funded by generous governments struggling to be seen to be doing something, without actually doing anything.