Thank you for your introduction and for the opportunity to speak to you all today.  Licensing trusts have a long history in the hospitality industry.  I look forward to meeting with some of you later today and hearing more about the good work that you do.  

As you know I have only been in the new job for a week.  The past week has been a whirlwind of briefings and meetings and I am gradually coming up to speed with my portfolio responsibilities.

As you will be aware, the Department of Internal Affairs covers a diverse range of activities and some of the areas for which I am responsible include citizenship, passports, censorship, lotteries, fire services, government technology services - not to mention gambling!

The department is the lead government agency on gambling matters and I am aware that gaming machines - commonly known as pokies - are a major area of interest for licensing trusts.

Can I say at the outset that the Government has not yet made any specific decisions about the future direction of gambling policy in New Zealand.  As a result, you might find that the content of my speech today is rather high level.  I am here to listen as much as to talk.  

What is clear, though, is that this is a period of financial uncertainty.  In this situation, the driving goal of the Government is to grow the New Zealand economy in order to deliver greater prosperity, security and opportunities for all New Zealanders.  This requires the creation of an enabling regulatory environment.  

Large corporates are likely to reduce their donations and sponsorships.  This means that the better allocation of grants through outcome-based funding will be an important way to support our communities.  

What I am keen to hear in these early days of my time as a Minister is how the gaming machine sector can maximise its contribution to this goal.  

The process of listening to community and gambling sector views was initiated by my predecessor.  He met with many different representatives within the sector and the wider community in order to get a better idea of the issues for gambling in New Zealand and how these issues may be addressed.  I would like to continue that process.

It is important to do this because gambling is a significant economic activity in New Zealand.  In 2007/08:

• gambling turnover exceeded $16 billion
• expenditure (that is, player losses) was just over $2 billion
• the amount spent on gaming machines in pubs and clubs alone was $938 million, and
• gambling provided over $400 million to community purposes of various sorts, and around $280 million in sector-specific taxation.

Gambling here is regulated by the Gambling and Racing Acts, both passed in 2003.  

The Gambling Act is a large, complex, and prescriptive piece of legislation.  The Act brought major reforms to the gambling sector, including a moratorium on casinos, a reduction in the number of gaming machines and new gaming machine venues, and a significant shift in focus towards the minimisation of harm associated with gambling.

Under the Act, corporate non-commercial societies are licensed to own and operate non-casino gaming machines to raise funds for what the Act terms "authorised purposes".

"Authorised purposes" means charitable and community purposes, including amateur sport, and the promotion and running of race meetings, including the payment of stakes.  It appears that no other gaming machine jurisdiction in the world takes this approach, which has the potential to generate significant community benefit.

Gaming machines play a particularly significant role.  Players spent between $906 million and $1 billion on non-casino gaming machines in each of the six years from 2003 to 2008 inclusive, more than 85% of it on machines in pubs.  

There has been a drop in the number of machines and venues since the Gambling Act was passed, and recently there has been a reduction in the amount players spend on the machines.  Even so, the amounts of money involved are still very large.

You are probably aware that a Gambling Amendment Bill is currently progressing through Parliament.  It makes several policy amendments and a large number of technical amendments to the Gambling Act.  

The Bill addresses a number of issues that have emerged since the Act was passed, with the aim of allowing it to operate as originally intended.  It was introduced by the previous government and was never intended to be a vehicle for major change.  

As I indicated earlier, the present Government has not yet made any specific decisions about the future direction of gambling policy in New Zealand.  However, we have already identified two high level priorities for non-casino gaming machines:

• to maximise the community funding generated by these machines; and
• to resolve questionable grant funding practices in the sector.

I would like to briefly discuss these priorities.  Maximising community funding generated by non-casino gaming machines is an important objective at any time but in the current economic climate, when machine revenue is declining just as demand for community funding is rising, it is even more of a priority.

I am interested in looking at ways to bring about further efficiency in the sector and further develop its potential to generate significant community benefit.

Resolving questionable grant practices is also a key priority.  From what I have seen and heard so far, and based on discussions between my predecessor and the wider community, it seems that there are deep concerns about how the present arrangements are working.

A recurrent theme is a loss of confidence in the current framework for the distribution of gaming machine profits to community purposes.

There has been some pressure to eliminate the potential conflicts of interest that can arise in the course of making decisions.  Some also think there is a need to ensure that the funds are distributed in what might be seen as a more "equitable" way.  They suggest that this could be done by requiring operators to distribute their profits to a wider variety of community purposes, or by requiring operators to return profits to the community in which they were raised.  

Another issue is the apparent conflict between the community benefit objectives for non-casino gaming machines, and the existence of commercial incentives and objectives in the sector.

There appear to have been cases of gaming machine societies or their personnel receiving benefits from community groups after the societies have made grants to the community groups concerned.  

These include horse races named after the society; the society's name on billboards or score boards at sports events; the society's name on sports equipment; access to corporate boxes; invitations to attend events; and so on.  In effect, societies acting like corporate sponsors.  

The issue that arises here is whether societies end up giving money mainly to those community groups that can give them fringe benefits.

I understand that there have also been examples of the inappropriate use of gaming machine funding for individual sports professionals and professional sports teams.  

The Department of Internal Affairs has told me that it is in the process of stepping up its gambling compliance focus.  Bedding in the Gambling Act 2003 saw the Department initially focus on venue compliance and the implementation of electronic monitoring of all non-casino gaming machines.  

Encouraging venues to understand the new harm prevention and minimisation requirements in the Act and regulations relating to signage, identifying problem gamblers and appropriate supervision of and access to gambling areas, was also a focus.

The Department's engagement with gaming machine societies initially focused around an expectation that those societies would voluntarily comply with requirements of the Gambling Act.  Societies told the Department they were committed to this approach and it was set out in documents like the Charity Gaming Association's Code of Conduct.

The Department has found (and they tell me this is reinforced by comments by gaming machine societies to my predecessor, in the media and by other interested observers of the sector) that these expectations are not being met.  

Maximising funds for the community does not seem to be the focus, increasingly competitive behaviour appears to be encouraging rorts, and disagreements within the sector mean that internal mechanisms are not resulting in voluntary compliance.

The Department has, therefore, sharpened its focus on licensing and compliance at the society level and will take action to suspend, cancel, or refuse to renew licences where breaches of the Act's requirements are found.  This sharpened focus has already seen sanctions being served and others are in the pipeline.  

I support the Department's approach to eliminate rorts, increase returns to the community and ensure greater integrity in the sector.

I will be listening carefully to the views of the wider community and the sector while considering other possible ways of addressing the critical issues.

In the meantime, I encourage everyone involved with gaming machines to reflect on that fact that the community is our most important stakeholder. Gaming machine grants are a significant source of funding for community, sports, leisure and recreational groups.  Gaming machine societies must make a considerable effort to address real community needs and provide long term benefits through their funding decisions.

It is imperative, particularly during this time of financial uncertainty, that the money from gambling goes where it should.

It is possible that further legislative steps will be taken at a later date to address the fundamental issues involved.  I hope to have a better idea of what these developments may look like shortly.

I would like to use this opportunity to thank those of you who belong to organisations that have made a very positive contribution to our communities.

Many of you have been in operation for a great number of years and have provided a long service to your local communities.  Thank you to those who have adopted good grant making practices, providing grants to a broad range of community groups while demonstrating that you are high-performing, community focused organisations. It is wonderful to see some of you setting a considerably high standard for the rest of the gaming machine sector.

It has been my pleasure to speak here today at the New Zealand Licensing Trust Association annual conference and I wish you all an enjoyable and productive time.  

But please also take the opportunity to think and talk about the Government's priorities for gambling, and how the sector can make a contribution to these priorities by distributing grants to genuine community needs, and taking action to address any dubious practices.  

Thank you very much.