Ministers will this week announce the location of a string of new casinos, marking a radical liberalisation of gambling. Why is a party famed for its nannying encouraging us to risk our shirts? Richard Woods and Dipesh Gadher report.

Ladies and gentlemen, place your bets. The siting of Britain’s first supercasino is about to be decided; it’s a fine opportunity for a flutter – and perhaps a fiddle.
Late on Friday the bookmaker Paddy Power was offering evens on the supercasino going to Greenwich, home of the dome, and slightly longer odds on Blackpool, wannabe Las Vegas of the north.

Then suddenly the bookmaker noticed a series of suspicious bets. Some customers were trying to place as much as GBP 5,000 a time on Blackpool winning the contest.

“Normally we’d get bets of GBP 10 or GBP 20 on this sort of thing. We were also being asked to take bets on Greenwich losing – which is unusual,” said a Paddy Power spokesman. “Everyone was wanting to bet on Blackpool getting it and London losing.”

The bookie suspended operations briefly and rapidly changed tack, making Blackpool the odds-on favourite.

Were the customers taking a flier or did they have inside knowledge? The result is not supposed to be known until experts from the Casino Advisory Panel present their secret recommendation to Tessa Jowell, the culture secretary, on Tuesday.

Either way, however, the flurry of activity said a lot about gambling in Britain. While the prospect of Britain’s first supercasino has dominated the headlines, the reality is that a much wider and deeper revolution in gambling is under way. These days you can even gamble on the future of gambling.

With little fanfare, gambling has turned under new Labour from a minority vice to a mainstream pastime. According to HM Revenue & Customs, total “betting stakes” have rocketed from GBP 7 billion in 1996, to GBP 16 billion in 2002, to nearly GBP 48 billion in 2005. Those figures do not include the national lottery, on which a further GBP 5 billion is gambled each year.

On another measure, including casinos and the lottery, the total “gambling stake” in Britain is now more than GBP 61 billion a year, according to a study conducted for the Department for Culture, Media and Sport (DCMS). That is more than the GDP of Slovakia.

Britain’s gamblers are no longer confined to the traditional betting shops, racetracks, bingo halls, football pools and Mayfair casinos. Technology has brought them spread-betting, video gaming, internet poker and even instant flutters delivered to their mobile phones.

In 2005 parliament passed an act that this year brings in a new legal regime for gambling as well as allowing huge new casinos. The government says that its aim is to promote better regulation and “socially responsible” gambling.

Richard Caborn, the minister responsible at the DCMS, said this weekend: “We have to meet the challenges from the development of new technology. The status quo is not an option. The new Gambling Act introduces measures that will protect children and vulnerable people, keep games fair and keep out crime.”

Critics say the changes are driven more by the industry – and government greed – than by any public need or demand. They say that more gambling will lead to more tax, more losers and more crime.

Hugo Swire, the shadow culture secretary, said: “The government keeps hiding behind these claims that it will protect children, tackle problem gambling and keep gaming clean.

“Yet experts, from the medical profession to the police, all raise serious concerns about the potential impact these plans will have. It’s astonishing that not only with supercasinos, but in so many other areas of gambling, this government seems hell bent on promoting the gaming industry despite there being no clear support from the British public.”

Why is a nanny government, which bans smoking and insists that we must save more for old age, so keen to let us gamble? How did a government obsessed by pettifogging health and safety end up giving us more opportunities to lose our shirts? But, above all, why do people gamble and what damage can it cause?

He reckons that he has blown GBP 5m through gambling and once lost GBP 750,000 in one weekend. But Charles Barkley is not too worried.

“Do I have a gambling problem? Yeah,” he said last year. “But I don’t consider it a problem because I can afford to gamble.” Having made a fortune as a former US basketball star, he said he would carry on gambling because he liked it.

Others are not so sanguine. Jake Brindell, a British gambler, grew up playing one-armed bandits and went on to lose nearly everything, including almost his life. Shortly before Christmas 2003 he blew a five-figure sum playing online poker and, after drinking heavily, tried to kill himself.

He recovered and now offers advice on how to stop gambling. So does Len Leathus, who is establishing a clinic in Harrow, north London, for problem gamblers. A former property developer, Leathus lost his marriage and his business after his gambling drove him to steal GBP 20,000 from an estate agent to fund his habit. He ended up in prison.

“I did win sometimes, but I wasn’t able to walk away,” he said. “Once you are on a winning streak, you have to keep going. The problem is that in the end you lose – and you not only lose your winnings but the money you went in with.”

Such “problem gamblers” are thought to number about 300,000 in Britain – a small proportion of the many millions who enjoy a flutter. But experts believe the number will rise. A British Medical Association (BMA) report recently warned that there needed to be much more funding to help to treat problem gamblers.

“The Gambling Act is obviously going to increase access and opportunity to gamble. We’re also seeing a real rise in people playing instant win games on the internet.” said Mark Griffiths, professor of gambling studies at Nottingham Trent University, who co-authored the BMA report. “My guess is we will see an increase in problem gambling.”

That is a risk the authorities seem willing to take. Britain, Griffiths believes, is quietly sliding into a culture of greater gambling largely because the government and industry are seeking extra revenue.

“I don’t think there’s been empirical evidence that the public want it,” he said. “But my guess is that once it’s here, they will like it. And once they’ve got used to it, it will be here to stay.”

There has long been a gambling streak among the British of all classes – from private gaming clubs for the aristocracy to hare-coursing for hoi polloi. But its legality has seesawed back and forth.

The latest cycle began in 1960 when the Conservative government tried to regularise a mishmash of rules and unofficial betting with a new gambling law. It made casinos and off-course betting shops legal. But the law on who could run them was so loose that within a short time thousands of betting shops and hundreds of casinos sprang up, one of the hallmarks of the social revolution of the Swinging Sixties.

Many became fronts for or victims of criminal activity. The Kray brothers, kings of the London underworld, used to extort protection money from clubs.

By the late 1960s Harold Wilson’s Labour government was so alarmed that it brought in new laws and subjected all gaming, including bingo and fruit machines, to much more rigorous control. Advertising was restricted. Casinos could only admit people who had joined as members at least 24 hours before gambling. The number of casinos plummeted to about 120.

Technology, however, powered on. The City of London led the way with its Big Bang in 1986, which eased access to a flutter on the stock exchange. The arrival of the national lottery in 1994 propelled gambling into the mainstream for the wider public, which went bonkers.

“When the lottery came in, gambling was destigmatised almost overnight,” said Griffiths. “We suddenly went from people who didn’t gamble very much on a weekly basis to two-thirds of the adult population gambling every week.”

In Las Vegas gambling and entertainment were coming together on an unprecedented scale. Huge hotels, some with more than 1,000 rooms, combined casinos with glitzy entertainment, celebrity stars and mini theme parks – “Disneyland for adults”, as some visitors dubbed these “resort casinos”. They elevated gambling onto a new plane as family entertainment.

When Tony Blair’s new Labour came to power it ordered a review of gambling, arguing that regulation had once again fallen behind technology, social attitudes and the gambling industry. Ministers and the industry soon smelt money.

The mood prevailing at the time is clear from internal culture department documents obtained under the Freedom of Information Act. “We are keen to see resort casinos in places where they will support tourism and regeneration,” advised a senior DCMS official in a briefing note for a minister who was meeting executives from MGM Mirage, a big US casino operator.

The document, prepared for a meeting in 2003, advised that one “line to take” in the meeting was: “We are emphatically not against large resort-type casinos.” Civil servants noted that “as far as MGM Mirage was concerned, the number one opportunity for gaming development was the UK”. In the United States there were “few real opportunities for growth”, so MGM was looking overseas: “There were some opportunities in Macau and Thailand, but nothing to rival the UK.”

Jowell initially envisaged no ceiling on the number of big casinos. She said in October 2004 that a limit would be “inappropriate” and that Britain might have between 10 and 40 casinos with slot machines offering GBP 1m prizes.

The government was keen for several reasons. Among them was the prospect of more tax revenue: according to evidence to a parliamentary committee, it might expect an extra GBP 3 billion a year.

Allowing supercasinos also offered an opportunity to rescue Blair’s great white elephant, the Millennium Dome. Empty, costly and seeking a purpose, the dome could easily house a “resort casino”, ministers thought.

That possibility led John Prescott, the deputy prime minister, to cosy up to Philip Anschutz, a US billionaire who was bidding to install a supercasino in the dome. Prescott met Anschutz seven times and even stayed at his ranch where he was given a pair of hand-tooled leather boots and played at being a cowboy.

The big gambling companies saw Labour’s plans for reform as the opportunity to install vast numbers of highly profitable gaming machines in a new market.

In the past few years thousands of “fixed odds betting terminals” have been installed in betting shops, thanks to a legal loophole. These sophisticated terminals let customers play video versions of roulette and other games and they have proved extremely lucrative.

In total there are an estimated 250,000 gaming machines in the UK, reaping GBP 1.3 billion gross profit in 2003 – the third-highest take after the national lottery and betting on horse-racing. These machines are midgets, however, compared with the monsters that operate in US supercasinos. There, thousands of gaming machines can be linked by computer – either within one setting or across different sites – so that players can participate in mega-jackpots running into millions.

There has been one big flaw among the GBP signs flashing up before the industry’s eyes: the British public. Total betting stakes may have ballooned but we have not, after all, turned into a nation of insatiable gamblers.

Among the DCMS documents released under the Freedom of Information Act is a briefing note advising the minister who was meeting MGM Mirage executives to tell them “not to talk up (their) ambitions for the UK’s casino market. Gambling is still a sensitive subject in the UK and (they) might – inadvertently – cause alarm and concern among MPs, peers and the media”.

While the government has claimed that there is unmet demand, its own research in 2004 showed that public opinion opposed more gambling. While people favoured the lottery, bingo and on-course betting, they strongly disapproved of gaming machines, casinos and internet gambling.

In the face of political opposition, Jowell rowed back, repeatedly reducing the number of supercasinos until it came down to only one – at least for now.

Nevertheless, Labour is still ushering in a huge change. Since 2001 there have been 106 applications under existing legislation for new casinos – 68 in the past two years. The rule requiring prior membership of a casino has been scrapped. Advertising restrictions are being relaxed: casinos will be allowed to advertise on television for the first time.

In addition, the new gambling laws will allow one supercasino, eight “large” ones and eight “small” ones. Even the small ones will be allowed a gambling area of up to 1,499 square metres.

The supercasino will be able to install up to 1,250 gaming machines offering unlimited prizes; “large” casinos will be allowed up to 150 machines offering prizes up to GBP 4,000; “small” casinos will be limited to 80 machines.

New rules will mean the proliferation of small-scale gambling: it will become legal to hold poker games in pubs for stakes of no more than GBP 5.

Tomorrow Jowell will seek to counter claims that the government is encouraging a gambling boom by announcing a crackdown on online gaming companies based outside Europe. Firms in jurisdictions with a lax regulatory regime, such as the Caribbean, will be banned from advertising their services in the UK.

Internet gambling is banned in the United States and nobody is sure how widespread it is in the UK. The Gambling Commission suggests that about 1m people indulge in it; some experts suspect the figure is many times higher.

Jowell said last night: “Safe regulation, not prohibition, is the best way to ensure any potential harm is minimised.”

She does not impress Dr Emanuel Moran who helped to set up Gamblers Anonymous in the UK and is an adviser on pathological gambling to the Royal College of Psychiatrists. He decries the new Gambling Act as a “hybrid monster” – aimed at controlling online gambling but encouraging casinos and other outlets.

“If you listen to Tessa Jowell, she continually spouts on about the low number of problem gamblers in this country and ensuring that this number will remain low,” he said.

“But the reason they are low is because the policy until recently has been that gambling should be provided on the basis of unstimulated demand. It’s there for those who want to do it.

“But it’s one thing to have it available, quite another to stimulate it by advertising, by having major developments like supercasinos and having GBP 1m jackpot machines.”

How to hit the jackpot: just play it 15m times

Gaming machines have come a long way since the first appeared early last century with prizes of gum, mints and amusement tokens. On modern electronic machines it is possible to play multiple games at the same time and to win multi-million-pound jackpots.

According to IGT, the US game machine maker, an ordinary “three-reel, 32-stop, single payline” machine offers 3,277 combinations that trigger a payout. The jackpot should be hit every 8,192 spins, it says. On the other hand, a “five-reel, 15-line video slot” offers 3,931,452 possible win combinations and potentially bigger prizes. But you are likely to hit the jackpot only every 15,503,906 spins.

No wonder they have become the cash cow of the modern gaming industry.

Behind the neon facades of the new machines are highly sophisticated computer systems carefully designed to keep players feeding in their money. Casino managers can monitor usage and instantly see which games are most popular.

Designers also know that there are two key psychological drivers for players — near-misses and the feeling of having some control over the game – and exploit them for all they are worth.

At Cambridge University, Dr Luke Clark is watching what happens to people’s brains when they gamble on slot machines. Although it is tricky to fit a one-armed bandit inside an MRI scanner, he has rigged up a suitable equivalent and is mapping brain activity as subjects play and win.

“There’s good evidence that gamblers frequently overestimate their chances of winning,” he said. “There is a reward system in the striatum – the centre of the brain and the frontal cortex. When players win, you see the circuitry light up. You also see it in drug addiction.” A near-miss can fool the brain into thinking that the odds of getting a reward are better than they really are.

Clark says that studies have shown that even non-gamblers will continue to play a gaming machine for longer if the machine is programmed to deliver near-misses. “The key thing is that there is no win, no payout — yet you play further,” he said.

Studies have also revealed how the illusion of control affects players. In roulette, players have been shown to place higher stakes if they, rather than a croupier, throw the ball on the wheel. In dice games, players tend to throw the dice with more velocity if they are trying to get a six rather than a one – yet the odds are just the same.

Gaming machines that offer complex progressions from one level to another give a similar illusion of control, says Clark.

“It’s possible to regulate simple aspects of machines, from the maximum stake to the maximum jackpot,” he said. “But it is clear that there are a lot more subtle psychological effects going on.”