28 September 2023 - Minutes of the meeting of the Board of Commissioners

Minutes of the meeting of the Board, Thursday 28 September 2023.

Location: Remote Meeting via Microsoft Teams.

Commissioners:

• Marcus Boyle (Chair) (MB)
• John Baillie (JB)
• Lloydette Bai-Marrow (LBM)
• Stephen Cohen (SC)
• Charles Counsell (CC)
• Sheree Howard (SH)
• Claudia Mortimore (CM)
• Helen Phillips (HP)
• Trevor Pearce (TP)
• Andrew Rhodes (AR)
• David Rossington (DR)
• Catharine Seddon (CS).

Executive Team:

• Helen Child (HC)
• Lucy Denton (LD)
• Sarah Gardner (SG)
• Helen Gibson (HG)
• Natasha Harris (NH)
• Tim Miller (TM)
• Alistair Quigley (AQ)
• Kay Roberts (KR) (up to item 7.1 only)
• John Tanner (JT).

Other participants: REDACTED

Observers: REDACTED

Apologies: REDACTED

1. Welcome, apologies, introductions and declarations of interest

The Chair welcomed new Commissioners and the newly appointed Director of People Services, NH, to the meeting. All attendees introduced themselves.

Apologies were noted from REDACTED.

There were no new declarations of interest.

The Chair commented that we have achieved a huge amount as an organisation in the past 6 months, such as the signing of the Enabling Agreement for the Fourth Licence of the National Lottery (NL) and the progress made on the Gambling Act Review. Looking at Board papers, some areas are still a work in progress but shows the art of the possible.

2. Minutes, Actions, Forward Look and Board Effectiveness Review (BER) action plan

The minutes of the meeting held on 20 July 2023 were agreed as a true record.

Actions: it was agreed that the action relating to board packs should be combined with BER recommendations relating to papers into a single action, and ask the Governance Team to formulate an overarching plan.

There were no comments on the BER action plan.

3. CEO’s Report

The Board noted the report for information.

AR introduced his CEO report:

• by way of background for new Commissioners, we use this report to give some shape on items on the agenda and give the CEO’s perspective
• AR drew the Board’s attention to the performance pack, particularly the improvement in the Operations Directorate
• REDACTED.

The Board asked questions and made comments:

• REDACTED asked for an update on verbal abuse directed at colleagues in the Gambling Commission’s contact centre. AR replied that colleagues working in the contact centre have been on the receiving end of verbal abuse, some of which has been very personal in nature and we have put a number of contact restrictions in place as a result. We do have measures in place to support staff. AR and REDACTED have also had a lot of abuse aimed at them recently on Twitter and LinkedIn, but we do monitor it
• AR speculated that the heightened level of abuse could be caused by a combination of a delay in publishing the GAR, a clash in commercial interests, and campaigning groups with very strong views
• REDACTED also noted the insidious development of nasty online comments and a photo when GC compliance colleagues attended an event. She viewed this as an attempt to undermine the regulatory authority of the Commission, and wanted to know what could be done. AR replied that our scope for action was limited, but it is worth the Board knowing what kind of atmosphere colleagues are working in
• asked about the timings and content of the Select Committee report, AR was expecting mention of advertising and how the statutory levy works. It will probably also make some points about funding. He expected the report to be published fairly soon
• REDACTED
• REDACTED gave his view on the fees model, which he described as not fit for purpose. Over the last 10 years, fees were reduced on one occasion and on another, the Commission had to borrow money. Whilst the Commission has not been as effective as possible with regard to forecasting expenditure, the underlying model drives much of the difficulty. REDACTED expressed growing confidence in current financial forecasting but noted that the fees model had a detrimental effect on relationships with Department for Culture, Media and Sport (DCMS) because the Commission was perceived as over or underspending and that is not usually the case
• AR confirmed DCMS receive the same performance and financial reporting packs as seen by Board and the Executive.

4NL update

REDACTED gave a verbal update on 4NL current status:

REDACTED

REDACTED

4. Chair’s Report

The Chair updated the Board on his and AR’s meeting with the DCMS Minister yesterday. There is a good relationship and cooperation.

The last Chairs’ roundtable was held yesterday and attendees were impressed with the work the Commission is doing around illegal markets, and took on board the need for operators to work with us on this topic. The Chair also continues to engage with the NEDs on operator boards with a meeting once or twice a year.

The Chair updated the Board on his recent call with the relatively new Chair of the Financial Conduct Authority (FCA).

REDACTED

5. Corporate Strategy

The Board noted the paper for decision.

The Chair commented that the conversation today is around direction setting, not about finalising the strategy (the paper will come back formally to Board at the 7 December Board meeting).

REDACTED introduced the item, providing context about the environment in which the Commission finds itself:

• the landscape has changed since the Board set the last Commission strategy. For example, we have a new National Lottery operator for the first time, the White Paper (WP) following the GAR, we have a new and more stable leadership and Executive at the Commission and we do have some financial flex in place to invest in our core infrastructure
• the Commission is still subject to a lot of external scrutiny, with a greater focus now on policy agenda
• critically, the things we regulate have changed and continue to change, with the market having become even more concentrated compared to 3 years ago
• this environment provides an opportunity for the Commission such as investing in people, systems and data
• our next strategy will take us up to the Commission’s 20th anniversary.

REDACTED drew the Board’s attention to the outcomes slide of the slide deck – envisaging the strategy on a page – with five strategic focuses with various draft commitments.

Board members expressed broad approval of the direction of travel and strategic outcomes, and made the following comments about the outcomes:

• should the strategy be 3 or 5 years – albeit noting that the Board had agreed a 3 year strategy at their last meeting
• where is the vision for what market the Commission wants to achieve at the end of the strategy, what will be the impact of the regulatory inputs on the external market
• should the avoidance of egregious harms to individuals be established as a target, supported by examples
• should real-time information be a goal, alongside a commitment to publish it
• part of the vision should be maturing the industry’s attitude to regulation, moving from grudging acceptance towards seeing improvements as the right thing to do
• important to have a means to track measurement of the Commission’s progress in achieving the desired regulatory outcomes
• should we include insight and influence as strategic ambitions for the Commission
• would like to see some data led choices from the perspective of how you measure harm in the gambling market
• would like to see more on the maturity of the market and also cost, budgeting and workforce planning and how are we going to measure success throughout the project, a vision not just KPIs, and build that in from the start
• would like to commit to publishing an annual review of compliance in the industry.

The Board asked questions and made comments on assurance:

• do we know what levels of sampling would be needed to get assurance through compliance visits. REDACTED confirmed more work would be needed to test this
• REDACTED added that data is a continuum. We have looked at data sets and we could do more in the future with what we have got. There is also a learning process here, what can you get from open-source data, and we have been talking about it with colleagues at the Advertising Standards Agency, for example. REDACTED noted that the Commission has an enforcement-led model of regulation, not supervisory. REDACTED noted that improvements to data management systems in Operations would help us make better use of what we already have. Would expect to see a specific mention of the Regulatory Code and more explicit recognition of our duty to protect the vulnerable
• pleased to see commitment to the fair and open objective, drawing on intelligence from the contact centre and other sources of consumer insight. Would expect to see this have a positive impact on public trust of operators.

REDACTED introduced the topic of earned recognition. This was a recommendation from a previous National Audit Office report. We do not suggest significant resource commitment to this now, but are asking Board for views on including this in a future strategy by signalling that longer term ambition here. AR added that the gambling industry is not mature enough yet, but to set this as an ambition provided an incentive for industry to demonstrate its capability and desire to proactively improve standards without Commission intervention. The Board agreed to this approach.

The Board agreed in principle the contents of the draft outline of a new corporate strategy subject to the comments above.

Ops Transformation approach and plan

The Board noted the paper for information.

REDACTED provided context for the item, noting she had first discussed operational improvements with the Board in September 2022. REDACTED

REDACTED that the discovery phase of Ops Transformation has almost been completed, and procurement of a case management system is underway. The programme will now move into the design phase. The team have also been working on building trust to support those colleagues who find change difficult.

The Board asked questions and made comments:

• noting the achievements to date, will new licensing processes be developed alongside the implementation of a CRM
• performance information should cover flow data rather than stock data. The flow is not sufficiently improved for us to have the level of oversight and assurance needed
• need to move away from a ‘hand-holding’ philosophy in licensing and improve compliance sampling
• it was disappointing to only be 80 percent of the way through the ‘as is’ part of the programme. Similarly, the disparity between a 6-month timeline set out in the June and July pack, compared to the new projection of two years is of concern. REDACTED explained that the procurement and implementation of a CRM had caused the extended timescale
• looking forward to seeing the indicative structure in process relationships
• could progress be made more quickly in any areas, for instance, account management.

Investing in our data ambitions

The Board noted the paper.

REDACTED introduced the item for steer:

• we are at a really exciting point with the data piece – the main reason is that we are now able to move the dial from where we have been to really exciting data sets
• through open banking, we will be able to understand the consumer pathway and to understand better where people are falling into harm
• we have been very lucky to start to develop in our capability, focusing hard on our data work enables us to focus on the core business and how to best measure the outcomes
• the ask from Board today is to support the data team to ensure we put data at the heart of the business, which is core as to what we are trying to do, and also for Board to support the team when we hit any buffers around industry sharing data.

The Board were generally positive about progress and asked questions and made comments:

• regarding the Commission’s ability to recruit talented data specialists, REDACTED recommended viewing the Commission as a shorter-term career destination for people (circa 18 months) and getting used to rapid turnover. REDACTED added many people face the same challenge, and the Commission should focus on the public value proposition to make the roles attractive. REDACTED agreed that the Commission’s brand could attract people
• more information on costing of plans, and the investment needed to support this work was emphasised
• proactive communication was urged, in an effort to pre-empt points of opposition in industry.

Action: REDACTED and REDACTED to include a costs page for the next iteration of the data paper.

6. Plans and updates

International engagement

REDACTED introduced the item and drew out highlights from the paper:

• the Commission are proactively identifying and investing time and energy into emerging markets to ensure we are aware of and deal with relevant risks. We are seizing available opportunities, especially in those markets where are our operators are expanding, for instance our membership of the North American regulators association and upcoming Las Vegas visit by the Chair and the REDACTED, where we are hosting a roundtable with numerous regulators along with signing Memorandums of Understanding (MOUs)
• regulatory regimes are increasingly being modelled on our own after engagement over many years. Can be seen with the likes of Denmark, Sweden and the emerging Irish regime. Has allowed for increasing levels of collaboration as we have recently seen when tackling illegal gambling with Ontario
• leading a cultural shift internally and externally to bring attention to the work we are undertaking in this space. Internally it is allowing for colleagues to take advantage of connections we are making to help with their work (for example the Gambling Act Review). Externally it is putting the industry on notice that regulators are engaging with each other and that regulatory failures in one regime may cascade through to others
• all in all, our aim is to solidify our position as a global influencer and leader of gambling regulation for the purpose of managing regulatory risks.

The Board were impressed with progress and made further comments:

• does this co-operation extend to joint investigations? REDACTED replied that we are working closely with some of the jurisdictions and moving into that space however, when it comes to data protection and personal data it starts to get challenging. REDACTED added that we are starting to understand more about the legal impediments of how data is used (which is less of a challenge across Europe)
• REDACTED.

Gambling Act Review (GAR)

The Board noted the paper for decision.

REDACTED briefly introduced the paper, noting we are not revisiting the WP, the primary discussion today is if we are happy to proceed with the consultations and recommendations as set out in the paper.

REDACTED went through the list of recommendations for Board approval as listed in the paper on:

• socially responsible incentives
• customer-led tools
• protection of customer funds
• LCCP RET consultation
• regulatory returns.

Asked about the rationale for 10 times wagering requirements. REDACTED explained that the figure is drawn from the policies and processes of other jurisdictions, including the Danish regulator.

DCMS, the Advisory Board for Safer Gambling and the Lived Experience Advisory Panel have also been engaged on this topic.

The Board:

1. noted the progress on Gambling Act Review policy implementation
2. agreed the strategic approach to the consultation proposals in the paper
3. approved delegation to the relevant Exec member on detailed content, publication, and timing for individual projects as listed in item 6.5 above
4. noted the procurement of necessary external support for policy evaluation, resulting in a multi-year contract(s) and associated budget commitments, and comment on any aspect of the proposed evaluation approach
5. noted that the relevant Exec member mentioned above (in item c) is the REDACTED, and in the event of him being unavailable, REDACTED.

7. Policy

Financial penalties consultation

The Board noted the paper for decision.

The Board made comments and asked questions:

• REDACTED

REDACTED

The Board approved the recommendations to:

1. Consult on proposed changes to our Statement of Principles for Determining Financial Penalties (SPDFP) and connected policy level documents relating to the Gambling Act 2005 (the Act). Consultation is required by virtue of Section 121(8) of the Act. This does not relate to financial penalties imposed under the National Lottery etc Act 1993.
2. Consider the current position and challenges and approve for consultation the following proposals for revisions to the SPDFP set out in Annex A. Broadly, we seek to provide clarity at points 2.5 to 2.8 ‘Criteria for determining the quantum of a financial penalty’, 2.9 to 2.10 ‘Discount to the financial penalty’ and make clear alignment of the regulatory settlement process.
3. Delegate authority for drafting the proposed amendments to the SPDFP and connected policy documents and drafting and publishing the consultation document on the proposed revisions, to REDACTED, the delegated REDACTED, will sign off on the overall consultations document.

8. Performance and delivery

Financial report July 2023

REDACTED asked Board to note that August financial data was only reviewed at meetings this week, hence, Board are seeing data for July 2023 today.

REDACTED gave an introduction and overview on expenditure:

• financial report is based as at the end of July, which is the period 4 position
• we are showing a surplus position of £754,000 against a budgeted surplus of £1.8 million
• expenditure is showing a 3.3 percent forecast overspend, this mainly relates to unbudgeted staff costs, including the one-off cost of living payment, new unbudgeted posts, which relate to GAR, data, operations transformation and team expansion and capacity requirements. This increase has been partly netted off by the delayed recruitment of budgeted staff
• period 5 expenditure is showing a forecast overspend of 2.5 percent, expenditure has therefore reduced, due to reprofiling of a research contract in line with contractual timescales
• as of July, we are carrying 42 vacant posts and a full year total of 87. The full year vacancy total includes 30 new unbudgeted posts
• as at August, 39 of these posts had been appointed and have start dates ranging from August to November and 11 were at interview stage, so we are making progress with recruitment.

REDACTED gave an overview on income:

• at the end of July gambling regulation income (excluding GIA for NL activity) was forecast to be 1.1 percent (£287,000) below budget, with £205,000 annual fee losses due to licence volatility, particularly in the remote sector where £164,000 operator application intake values have been lower than in the previous 2 years
• annual fee income accounts for 89 percent of income, and is forecast at £220,000 (1 percent) below budget. The budget included an assumption for losses (exits or reductions). By Period 4 we had used up the budget loss assumption of £500,000 (this is very early in the year for that to have happened). We have added an additional £300,000 loss assumption to the forecast to cover off further losses from remote sector (where the bulk renewal is at the end of October) and the impact of debtors
• on underpayers, we recently undertook a project which identified 118 accounts that were set to be undercharged £1 million. As we recognise annual fee income over the duration of each individual licence the £1 million is the FYE, and the 2023 to 2024 impact would be lower. By Period 5 we had realised £700,000 FYE (£300,000 in 2023 to 2024), with more anticipated over the coming months.

REDACTED added we have very little control over movement in fee income. She has been working really closely with the Executive team to manage and monitor expenditure. We are also about to come into the supplementary estimate period and this is what we will be measuring against.

The Board raised questions and made comments:

• improvements in the quality of financial forecasting was noted; nothing in this paper was a surprise based on previous reports. We are only four or 5 months into the financial year and there is a lot that could still happen, and we also have a lot of uncertainty around the National Lottery and GIA. There should not be a concern at the slight overspend on budget, our income is still expected to be greater than our expenditure with reserves of £13 to £14 million at year-end. On staffing, recruitment seems to be moving more slowly than expected. REDACTED commented that we are doing the best that we possibly can on recruitment and are going back round to all teams to understand their realistic forecast for staffing requirements
• it was noted that the Commission is not as competitive as it would like to be in the recruitment market. That is largely about salary (circa 20 percent lower than civil service), which is circumscribed by the DCMS pay remit. We are bringing in an external reward consultancy to see if there are things that we can do to make us more competitive. REDACTED is carrying out a piece of work around grading structures.

Quarter 1 2023 to 2024 performance report

REDACTED introduced the item for steer.

Key headlines for quarter 1 (April to June 2023) performance are as highlighted in the pack and from a people perspective the numbers are looking very steady as we move towards to end of quarter 2 (July to September 2023).

The Board asked questions and made comments:

The pack is lengthy and will condense at some point; we are aspiring to a one-page dashboard of key metrics, supported by more detailed data. The same pack goes to DCMS, Board and the Executive team so we need to keep consistency.

9. Culture

Kindness campaign

The Board noted the item for information.

REDACTED introduced the item and advised Board that REDACTED has offered to present her kindness campaign to Board today.

REDACTED took Board through her slide presentation on the campaign and then invited questions.

The Board were very supportive of the campaign and made comments:

• REDACTED was invited to attend the next Remunerations and Nominations Committee meeting to present the same
• Commissioner visibility was discussed. REDACTED recommended Commissioners attending team meetings, joining the Chair at this Connect with Marcus sessions, giving colleagues the opportunity to connect with colleagues in small groups and to mingle around the Commission before and post Board meetings. It would also be an idea to invite some colleagues to join Board at lunch times, when Board meetings are taking place
• MB thanked REDACTED on behalf of the Board for presenting today and endorsed all of her suggested actions.

10. Governance

Risk management Policy and Risk Appetite Statement

The Board noted the paper for decision.

REDACTED introduced the paper:

• the paper has previously been discussed by the Audit and Risk Committee
• given the importance of the risk management in corporate governance, we consider it appropriate that the risk management policy should be included in the Corporate Governance Framework (CGF)
• the draft Risk Appetite narrative has been informed by discussions and advice from teams across the Commission and is consistent with the categories and definitions set out in the Government’s Orange Book (opens in new tab)
• the risk appetite is really key for us to develop our risk management and strategic risk to the Commission and to support good governance, in terms of what to look at in terms of risk, in Board papers.

The Board were very positive about the quality of the work, and covered the following points:

• recommended setting an outline timeframe for completion of questions in the policy (now, 6 months, 2 years)
• recommended including consideration of execution risk, which is not within the Orange Book
• recommended considering providing examples of the definitions of risk appetite
• REDACTED, replied that on our Strategic Risk Register, we do have reference to the risk appetite that we set last year. There are no risks outside of the overall strategic risk appetite
• it was noted that legal risk appetite has been based on the Attorney General’s guidance on legal risk and one of the particular issues was the very different types of impact across the Commission
• there is a piece of work we need to do on embedding risk in decision making. One of the benefits of risk being part of the Governance team is that Governance manages those decision-making processes. To note, on the Board paperwork Governance are carrying out, there is space for a link to risk and we will make this risk work fit in with the paper quality review action discussed above.

Subject to the comments made above, the Board:

1. Reviewed and agreed the draft Risk Management Policy.
2. Agreed to the inclusion of the Risk Management Policy in the Corporate Governance Framework (CGF).
3. Reviewed and agreed the draft Risk Appetite Statement.

Committee arrangements

The Board noted the paper for decision.

The Board approved:

1. The changes to Committee membership outlined at paragraph 4 of the paper, with immediate effect.
2. The overall scheme of membership to the end of 2024 is shown in Annex A of the paper.
3. Committee assurance reports.

The Board noted the Audit and Risk Committee report for assurance with no comments.

The Board noted the National Lottery Committee report for assurance. REDACTED The Board had no comments to add.

11. Any Other Business

Feedback on today’s meeting – some attendees commented the meeting was run well and had a good balance of conversation and discussion.

12. SID session – Commissioners only – not minuted

13. Below the line items (for noting)

The Board noted the previously approved items by correspondence, as below, with no comments:

• HR & Payroll systems contract renewal
• REDACTED.

Date of the Next Board Meeting: 7 December 2023.