David Fisher is a senior reporter for the NZ Herald.

Small Maori health group takes on lottery giant

A Waikato health organisation exposes a trend of targeting poor communities through Lotto, a relatively cheap,easily available and widely accessible form of gambling, despite attempts to discredit the information.

Lotto advertising was reported to be 'everywhere you looked' and had the philosophy, 'You need to be in to win'. Photo / Christine Cornege
Lotto advertising was reported to be 'everywhere you looked' and had the philosophy, 'You need to be in to win'. Photo / Christine Cornege

In the heart of the Waikato, a small health provider dared to step out from the pack. Lotto, warned Hauora Waikato, has dangers.

The kaupapa Maori organisation was fed through the wringer after speaking out. Turning the handle was the state-run Lotteries Commission.

Since first warning of increasing signs of gambling problems associated with Lotteries' products, Hauora Waikato has been audited, reviewed, questioned and audited again after producing statistics showing the country's safest gambling option was causing problems.

As it turned out, it was prescient. The spikes in gambling harm from Lotteries Commission products are mirrored in the latest gambling figures reported to Internal Affairs Minister Chris Tremain.

While pokies remain the cause of the greatest gambling harm, Mr Tremain was told in November that Lotteries Commission products are enjoying a boom in popularity - while also causing a rise in gambling problems.

In the next month, Mr Tremain and Cabinet have a decision to make. Do they let everyone's favourite gambling pariah, the pokies, carry the cost of rising gambling addiction.

Or do they follow advice from the Gambling Commission and force their own gambling body, the Lotteries Commission, to carry the extra cost?

One too many

"One person who has a problem is one person too many," says the Lotteries Commission's latest annual report.

As we'll see, it put a lot of effort into arguing about how those people were counted - and who did the counting.

The funding of institutions that help problem gamblers rests on extracting money from those industries which profit. Hauora Waikato's $840,000 budget for problem gambling is part of the cycle. It and other providers report figures to the Ministry of Health and the information forms a picture of problem gambling in New Zealand.

That is then used to work out how much money each provider should put into problem gambling.

Every three years, the gambling industry meets the Gambling Commission and other expert groups in the field. They hammer out who should carry the cost for fixing the problems they create, based on how much harm each group causes and how much money is spent by gamblers.

Increases in problem gamblers in a sector can leave the responsible group with a higher cost. They all lobby for a lower share and over how the cost is divided; whether the cost should be shared based on money gambled or problems caused.

In 2009, when Hauora Waikato first reported an increase in problem gambling, the repercussions went straight to Parliament. The Ministry of Health raised concern about the possible harm Lotto, Instant Kiwi and Keno were having on poor, predominantly Maori communities.

The ministry's gambling harm minimisation manager Barbara Phillips linked the spike in figures to the huge $30 million Lotto jackpot paid out that year. Along with the big money there was, she said, an "extensive marketing campaign" focused on "high deprivation areas in which Maori and Pacific populations are over-represented".

The Lotteries Commission's then-chief executive Todd McLeay wrote to the Minister of Internal Affairs, Nathan Guy, at the time, complaining about the "credibility" of the data.

He cited Hauora Waikato's data, which had reported increases in problem gambling caused by Lotteries Commission products. The increases came in Hauora Waikato's area of responsibility - Waikato and the Western Bay of Plenty.

There was no sense to the spike, Mr McLeay told his minister, and the Ministry of Health had been asked to investigate the health provider. "As things stand, we will be asked to pay a very substantial increase in the problem gambling levy based on what, we believe, is questionable data."

The increase would hit Lotteries Commission profits (this year $197 million), which fund community projects along with Creative New Zealand, the New Zealand Film Commission and Sport New Zealand.

Mr McLeay warned: "Any increase in our levy directly impacts our distributions to the Lottery Grants Board. That would be a travesty if it were to occur simply as a result of some anomalous presentation data in two relatively small parts of New Zealand."

The notes of the Gambling Commission hearing into the 2010-2013 levy are revealing - the Lotteries Commission submission downplays its impact on problem gambling. It blamed pokies (correctly), saying: "Lotteries products will not satisfy addicted gamblers, because they do not offer repetitive play."

When the levy was set, the Lotteries Commission won and lost. The Ministry of Health stood by its provider and the statistics were used to force an additional $1.5 million toward the gambling levy. But the ministers, Mr Guy and current minister Peter Dunne, rejected officials' advice to shift the funding formula to reflect the amount of money spent on Lotteries Commission products.

The Lotteries Commission's questions over the data spikes continued - in 2010 other small health providers were also highlighting spikes. The questions led the Ministry of Health to contract Radco Consulting to review the figures. When told no issues had emerged, the Lotteries Commission sought the source data and audits for its own investigation.

Armed with data, Mr McLeay hired Deloittes to review it. The accounting firm also sourced Hauora Waikato's publicly available financial documents, writing a report which Mr McLeay passed to Mr Guy.

It was the sort of warning which would make any government minister sit up straight.

There were "issues that should be of immediate concern" in the financial statements of taxpayer-funded Hauroa Waikato, according to a Deloittes report. There were also outliers and unusual trends in gambling data, raising the possibility of inaccuracies, it said. Mr McLeay told Mr Guy "unusual spikes in problem gambling data related to lottery products" were centred on Hauora Waikato. Mr McLeay urged his minister to pass the report to associate Minister of Health Peter Dunne "for his information and follow-up".

The financial concerns were without substance - the highlighted payments to and lending from Hauora Waikato's accounts showed money being used by the provider to set up and develop New Zealand's only Maori-owned psychiatric hospital at Tamahere, on the outskirts of Hamilton.

But such a serious warning at the upper levels of power has repercussions. The scrutiny was intense for the years which followed. The results of the audits showed Hauora Waikato chief executive Rei Wihana what she already knew - the organisation provided good service and professional help to those who needed it. She speaks of the "passion and commitment we have for recovery for people disadvantaged by their addictions".

"It has been a long arduous journey of trying to preserve our integrity and all that distracted us from the people needing our attention - such a waste of time and debilitating for our team."

The reporting shown in audit material released through the Official Information Act show few criticisms. One breach by Hauora Waikato relates to too much excellence - it was in breach of Ministry of Health rules about storing paper-based records because it didn't have any, having moved to a paperless office. The ministry changed its contract to keep up with the small provider.

In other areas, the ministry found areas of Hauora Waikato business so good they wanted its programmes to be used as a "showcase" to other providers.

The audits also show Lotto was far from its only focus. With a focus mainly on poorer, vulnerable communities in its catchment area - most with high Maori populations - it asked in June 2011 why "normalisation of gambling is marketed to poor communities".

It reported increases in the use of pokies, raised concerns around the growth of SkyCity's Hamilton casino, noting it now ran shuttle buses from Tauranga and had shifted to 24-hour opening.

But it did not leave the government's gambling provider alone. In 2011, it reported feedback from an expo in Taumarunui at which "many participants felt they were 'bombarded' with Lotto advertising stating it was 'everywhere you looked'."

"All had the philosophy 'you need to be in to win' even though they spent more money than they had ever won and did not care to think how much they had spent over the years.

It is again suggested that all gambling activities including Lotteries products should carry government health warnings about risks associated with gambling harm."

In December 2011, it reported to the ministry: "Hauora Waikato Group has repeatedly raised concerns and will continue to raise concerns about the potentially negative effect of Lotteries Commission products."

It called for greater research, saying there was little data showing the real impact. It targeted comments by Mr McLeay about growing the Lotteries Commission business after ensuring "nobody is using our products in a way that's harming themselves".

Hauora Waikato's report to the ministry stated: "Such a statement suggests he remains unaware of the gambling harm being caused by their products or he is aware but remains focused on achieving significant returns for his shareholders at the expense of communities, particularly Maori communities."

It cited Internal Affairs and Health Sponsorship Council data showing 71 per cent of Lotto players live in poor areas. As the scrutiny began to subside, and life returned to normal for Hauora Waikato, gambling statistics upheld the provider's controversial reporting three years earlier.

The three-year cycle of the problem gambling levy also saw a shift from the Lotteries Commission when it appeared before the Gambling Commission.

Where previously any harm was down-played, notes from the meeting read: "Lotteries acknowledges that there is a small number of people for whom playing its products can create gambling problems."

A report commissioned by the Gambling Commission also gave an insight into the impact of Lotteries' products, and the danger they posed. They were found to be the second most likely form of gambling to lead to a family argument, or a family member missing out on something they would otherwise have, placing Lotteries between pokies in pubs and clubs and pokies in casinos.

The Lotteries Commission said it now accepts the figures put forward by Hauora Waikato.

"The Ministry of Health remained confident that all data provided was reliable and accurate, and engaged KPMG to conduct an audit of Hauora Waikato. NZ Lotteries accepts the ministry's findings."

It now relies on the 2009 figures it had previously questioned, saying if there was a growing problem then it would be reflected in those.

As it is, they hold steady.

Clinical psychologist Aroha Waipara-Panapa, the general manager of Hauora Waikato, described Lotto as completing the "magic triangle" for gamblers.

It was relatively cheap compared to other forms of gambling, it was easily available and it was also widely accessible.

The first inkling there was an increase in problem gambling came with a greater understanding of what was being sacrificed for the chance "to be in to win".

Told Lotto now accepted the figures, she said: "That's generous - but that is in line with what the current findings are."

Then she paused, and asked: "If they do now accept our findings, what then is their responsibility?"

Jackpot hype hooks gamblers

Professor Max Abbott says perspective is important with Lotteries Commission products.

Problem gambling associated with Lotteries products had increased - "albeit from a very small base".

The "game" plays on Wednesday or Saturday, so does not have the constant draw seen with pokies or other casino games.

Professor Abbott, the Vice-chancellor of Auckland University of Technology, said: "Part of the image is that it is seen as a less harmful form of gambling."

But there was no doubt some people were harmed by Lotteries' products, he said. "It's the jackpots - people get caught up in the hype and the dream."

For Peter Adams, the director of the University of Auckland's centre for gambling studies, the response of the Lotteries Commission is at odds with its role as part of the wider government structure.

"There is a common interest in keeping that yield [from Lotteries' products] up."

Gambling companies which actively try to reduce harm face the prospect of affecting profits. The money goes to community projects and other areas which, if they suffered cuts, would have political impact.

"Lotteries has always lived under the shadow of losing its market share. They've held up their own."

The Gambling Commission report shows they have the greatest forecast growth in revenue in dollar and percentage terms in the next three years.

"It is a real worry that a government-run agency is following such a staunch commercial model," said Professor Adams, the author of Gambling, Freedom and Democracy.

"This gives a strong sense of the lengths they will go to in ensuring the business doesn't come under threat. We've got a government-owned business that pursues threats to its business in quite an aggressive fashion."

Read more: Lotto linked to gaming woes

- NZ Herald

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