Select Committee on Culture, Media and Sport First Report


THE OPERATION OF THE NATIONAL LOTTERY

IV. THE OPERATION OF THE FIRST NATIONAL LOTTERY LICENCE

Setting up the National Lottery

27. Camelot's structure and its constituent partners, who brought diverse relevant expertise to the company, enabled the Lottery to be set up quickly.[70] The greatest challenge for the company was the installation of the technical infrastructure, which included the communications network, retailers' terminals and the central computing systems that logged transactions. The company also had to train its staff and retailers to use the technology.

Methods of sale

28. Camelot launched the National Lottery main draw on Monday 14 November 1994. National Lottery Instants were launched the following year on 21 March 1995. Thunderball and Lottery Extra are weekly online games added during the course of the Lottery licence. The Big Draws 2000 and 2001 were special New Year events.[71] Players buy 99.9 per cent of Lottery tickets through the retail network.[72] Camelot introduced the online game through 10,000 retailers, and "met comfortably its licence commitments regarding online outlet numbers".[73] The retailer estate, approximately 65 per cent of which are small independent retailers,[74] reached its current number of almost 25,000 online terminals and almost 11,000 Instants-only outlets in 1996.[75] The technology used by Camelot for the sale of Lottery tickets has proved to be reliable.[76]

29. There is a National Lottery retailer within two miles of 90 per cent of the adult population; Post Offices, with 9,600 outlets, are the largest single component of the retail network.[77] Some terminals are not profitable but are maintained by Camelot as a community service. The company has stated that it will maintain 1,000 of these terminals "as community terminals which will continue even though they cannot be justified on any profitable basis".[78]

30. We expect the retailers to continue to provide the main distribution method for Lottery sales during the next licence period. We expect the Commission to ensure that the operator maintains the current level of geographical coverage and that Camelot fulfils its commitment to maintain terminals that are not necessarily profitable as a community service.

Lottery players

31. The main online Lottery game was successful from its launch and is regularly played by the majority of the population, who spend about £2 per week each on the main game.[79] The Lottery is played by people of all ages and all social groups.[80]

32. Lottery players may receive some consolation from the fact that some of their money is going to good causes, but the primary reason they play the Lottery is to win money. Lord Burns did not consider people played the Lottery primarily because of where the money would be going, but as a "small investment in a dream".[81] Professor Ian Walker, of the Department of Economics at the University of Warwick, told us that "people play not in order to lose money to charity, but they play to win".[82] Furthermore, according to Professor Walker, even when players express a preference for a particular type of operator, or particular good causes, such a preference does not influence their level of play.[83] Mr Stephen Dunmore, Chief Executive of the New Opportunities Fund, considered that "all the evidence does suggest ... that people actually buy tickets to win, they do not buy tickets because the money is going to good causes".[84] A report into the Irish National Lottery found that the primary reason people played was to win, but concluded that "other factors such as the enjoyment of playing and support for beneficiary groups also ranked highly".[85]

33. Evidence suggests that those in lower income groups are more likely to play the Lottery, while those in higher income groups will generally spend more on the Lottery.[86] Professor Walker said that analysis of levels of play suggested that "the probability of participating ... is a strongly decreasing function of income. The richer you get, you are much less likely to play ... If you do play the game, the amount that you play increases slightly with your income."[87] Levels of play among low income groups have led to claims, in both the United Kingdom and the United States, that the Lottery has a regressive impact.[88] That view was also stated anecdotally by retailers, who said that some players consider the Lottery to be "a tax on the poor for the patronage of the rich".[89] We see no justification for the view that the Lottery is a tax, whether on the poor or anyone else. The purchase of a National Lottery ticket is a wholly voluntary decision, which players make to take part in the dream of winning a large amount of money.

Lottery sales and proceeds to good causes

34. In 1994 the National Audit Office predicted that Camelot's operation of the National Lottery for seven years would lead to a total contribution of £6,229,000 to the good causes.[90] Initial sales were some 40 per cent higher in the first quarter of the Lottery's operation.[91] The official estimate of income to the National Lottery Distribution Fund over the Lottery's lifetime was revised in October 1998 and again in 1999.[92] Ms Dianne Thompson, Chief Executive Designate of Camelot, told us that the company expected to raise £10.5 billion for good causes by the end of the licence period.[93] Over the course of the first licence sales levels have remained reasonably stable at approximately £5 billion annually.[94]

Promotion and public image

35. The promotion of the National Lottery brand is managed by the operator and regulated by the Commission.[95] The promotion of the National Lottery is intended to encourage participation without appealing to at-risk groups.[96] Camelot was keen to have a more uniform approach to the promotion of the Lottery that involved the Commission, retailers and distributors, and the distributors supported greater co-ordination in the promotion of their work and Lottery-funded projects.[97]

36. The BBC's broadcasting of the National Lottery draws is a substantial benefit to the operator, for which Camelot is paid by the BBC.[98] We agree with the National Heritage Committee's view that the licence-fee payer should not subsidise promotion of the National Lottery. It is not essential that the BBC is the broadcaster that covers the National Lottery draws. We note that, as the operator introduces new games, the broadcasting of multiple Lottery draws will probably alter the nature of the television coverage.

37. The public image of the Lottery is formed by the activities of everyone involved in it, including the operator and its shareholders, the regulator, the distribution bodies and Lottery-funded projects, as well as retailers and Lottery winners. The Lottery remains a popular activity, but from time to time it has suffered from adverse publicity, most notably in relation to Camelot's profits and problems with large Lottery-funded projects.

38. The activities of numerous participants in the National Lottery have informed the public's opinion of that institution. There is no single view about the National Lottery as a whole that can be attributed to the British public. It is therefore important that all of those involved in the National Lottery's operation, regulation and distribution of proceeds conduct and promote themselves to the benefit of the Lottery.

Under-age and problem gambling

39. It is illegal to sell Lottery tickets to anyone under 16 years old.[99] Under-age gambling has been a concern since the introduction of the National Lottery, and particularly since the introduction of scratchcards, which are considered by some to be "harder" gambling than the main draw, and to be more attractive to children.[100] In addition, unlike in many jurisdictions of state lotteries, in the United Kingdom in 1994 there were already children who regularly gambled illegally. The Lottery therefore provided another avenue for such children.[101] The operator and the regulator have a duty to monitor and reduce under-age sales.[102] Ms Thompson said that the company had a game design protocol that tested games very specifically against three areas: against under-16s, low income groups and those with compulsive gaming tendencies and that any game that appeared to appeal to these groups would be "redefined, redesigned or scrapped".[103]

40. A survey in 1997 of almost 10,000 12 to 15-year-olds found that 47 per cent had gambled on National Lottery scratchcards, and that 40 per cent had gambled on the National Lottery main game.[104] A minority of under-age gamblers displayed anti-social behaviour associated with gambling, including truancy, alcohol and drug abuse, and theft.[105] Young people who gamble illegally on the National Lottery also often abuse other forms of gambling.[106] According to Dr Sue Fisher, of the Centre for Research into the Social Impact of Gambling at the University of Plymouth, children might be at risk as a result of concessions made to other forms of gambling following the introduction of the Lottery, which might make such gambling more attractive or accessible to under-age players.[107]

41. A comparable survey conducted in 1999 showed that under-age play remained at a similar level, and also that parents or other adults purchased tickets on behalf of children.[108] The survey found that more than 50 per cent of attempts to purchase National Lottery products by children under 16-years-old had been successful, with a slightly higher success rate in small retailers.[109] Since the launch of the Lottery, 91 terminals have been removed from retailers because of illegal ticket sales.[110] Camelot has introduced several initiatives to combat under-age sales, including, in April 1999, a scheme called Operation Child, in which children over 16 who look younger carry out test purchases.[111] Dr Fisher emphasised that the role of retailers in preventing under-age sales should not distract attention from the damaging impact of the Lottery being promoted as family entertainment, which contributed to its attractiveness for under-age players.[112] Retailers and Camelot supported the introduction of proof-of-age card schemes.[113] However, Dr Fisher thought children could copy and forge such cards.[114] An alternative suggestion was that the minimum age to play the Lottery should be raised to 18.[115] The National Lottery Commission and operator must continue to give priority to activities designed to reduce the incidence of under-age play. We do not consider it appropriate to raise the minimum age to play the Lottery.

42. Adult problem gamblers do not seem to be drawn to the National Lottery. According to the British Gambling Prevalence Survey, 1.2 per cent of problem gamblers play the National Lottery, and "problem gambling prevalence among people who have only played the National Lottery is 0.1 per cent".[116] A helpline for problem gamblers, operated by Gamcare, was reported to receive less than 2 per cent of its calls from players of National Lottery products.[117] However, Dr Fisher sounded a note of caution about the statistics, and described the possible relationship between under-age gambling and problem gambling in later life.[118] It was suggested that, although levels of problem gambling associated with the National Lottery are low, the Lottery was accessible to under-age gamblers and might contribute to their developing into problem gamblers in later life.[119] Both the Commission and the operator were conscious of the potential of the National Lottery to contribute to problem gambling.[120]

Impact on charities

43. Since the Lottery's inception, concerns have been expressed about its impact on charities.[121] Charities have seen their income fall in recent years, but the reasons for that decline have been difficult to assess.[122] In Scotland, the proportion of people who give money to charities is falling, but the average donation is fairly stable.[123] A study commissioned by the National Council for Voluntary Organisations (NCVO) found that larger and smaller charities had been affected less than medium-sized organisations.[124] The study concluded that the National Lottery might be one of the factors causing the decline in income, and the NCVO called for more research into the Lottery's impact on charities.[125] We recommend that the National Lottery Commission conduct its own survey into the impact on charities, including differential impact, of the National Lottery.

44. Charities have also benefited from the work of the National Lotteries Charities Board (NLCB).[126] The Association of Charitable Foundations stated that "the Lottery's contribution to the voluntary sector's health and vibrancy ... is to be greatly welcomed".[127] The NCVO study concluded that grants from the National Lottery Charities Board had boosted the income of smaller charitable organisations.[128] However, concern was expressed that the NLCB contributed less than the public expected to medical research charities.[129]

Impact on other gambling

General impact

45. Camelot claims that regulation of the gambling industry has been relaxed in response to the introduction of the National Lottery, and that as a result the gambling market has become more competitive.[130] The company also suggests that the wide accessibility of the Lottery and its benign image as a socially acceptable form of gambling has improved public perception of soft gambling.[131] A survey of public perceptions of gambling found that in addition to the National Lottery and small lotteries, Bingo, pools and on-course and off-course betting were considered socially acceptable.[132]

Football pools

46. The football pools have been perhaps the industry most seriously affected by the National Lottery.[133] Our predecessor, the National Heritage Committee, highlighted the inequality of legislation controlling the Lottery and football pools.[134] That Committee also expressed concern about job losses in the football pools industry.[135] Those concerns have largely been proved justified: since 1994, the income of pools companies has fallen from £988 million to £180 million,[136] and more than 5,000 jobs have been lost in the pools industry, many of them on Merseyside.[137] Despite the devastating impact of the National Lottery on the pools industry, the Commission has no formal role to monitor the Lottery's impact on other forms of gambling.[138]

47. The Government has made concessions to the pools industry since the introduction of the Lottery, including a relaxation of the rules on advertising and a change in pools duty, but the industry still felt that it was the subject of discrimination.[139] The introduction of the Lottery has forced others in the gambling industry to expand, and pools companies have been instrumental in the exploitation of new forms of technology.[140] However, pools companies want to expand further, sell online and use the Lottery network, and they consider the National Lottery to have an unfair domination of retail distribution channels.[141] We welcome the efforts made by the pools industry to recover from the impact of the National Lottery on that industry. We recommend that the Government remove the restrictions on the pools industry where these restrictions hamper the ability of the pools to compete with the National Lottery.

Private Lotteries

48. Private lotteries have suffered a gradual decline in income.[142] The Lotteries Council represents small society lotteries, 40 per cent of which support sport, and 40 per cent charities, including hospices.[143] The income from such lotteries is crucial for their beneficiaries' survival.[144] Many such lotteries have closed since the introduction of the National Lottery, from which they receive no funding.[145] The Lotteries Council and Rank Group called for changes to the legislation that controlled small lotteries so that they can compete on a more equal footing with the National Lottery.[146] We recommend that the Government consider a relaxation of the prohibitions on society lotteries, including those on rollovers and the monetary limits on stakes and prizes.

Bingo

49. Bingo has witnessed a decline in income, admissions and the numbers of clubs, especially smaller community clubs, since the introduction of the National Lottery.[147] According to the Bingo Association, that decline is due to similarities between Bingo and the National Lottery, and, therefore, the attractiveness of the Lottery to Bingo players in particular.[148] The Association also asserted that Instants have particularly harmed the Bingo industry.[149] Sir Peter Fry, Chairman of the Bingo Association, said that players enjoyed the social aspect of Bingo and that "we would argue that we provide an evening's or an afternoon's entertainment to our customers".[150] The Bingo Association was keen that restrictions, such as the prohibition on rollovers on the National Bingo Game, should be relaxed.[151] This Committee recognises the positive aspects of Bingo clubs. We recommend that the Government assist the Bingo industry by, at the very least, removing the prohibition on rollovers for the National Bingo Game.

50. Amusement arcades and coin-operated gambling machines have seen a decline in income since the introduction of the Lottery.[152] Off-course and on-course betting has also declined since the introduction of the Lottery.[153] The bookmaking industry repeated its calls, supported by this Committee's predecessor, to allow betting on the Lottery.[154] We repeat the National Heritage Committee's recommendation that betting on the outcome of the Lottery should be permitted.


70  QQ 45-49; Evidence, p 25. The Camelot consortium comprised Cadbury's Schweppes plc, which provided consultancy services including marketing, consumer trends and retail developments; De La Rue plc, which supplied consumables, Instants tickets and consultancy services; GTech Corporation, which provided general consultancy, software, Instants-only terminals and online terminal components; International Computers Limited, which provided assembly of online terminals, retailer training and terminal maintenance; and Racal Electronics plc, which provided network communications and maintenance. Back

71  Evidence, pp 6, 103-105. Back

72  Evidence, p 102; the remaining 0.1 per cent of sales is through postal subscription. Back

73  HC (1994-95) 569, 7 July 1995, pp 38-39. Back

74  Q 2; Evidence, pp 38, 103. Back

75  QQ 58, 165; Evidence, pp 4, 38, 102; HC (1994-95) 131, pp 1-2. Back

76  Evidence, p 5; see National Lottery Commission Annual Report 1999/2000, p 23. Back

77  Evidence, pp 4-5, 103. Back

78  Q 82. Back

79  Evidence, p 109. Back

80  Evidence, p 25. Back

81  Q 594. Back

82  Q 275. Back

83  IbidBack

84  Q 525. Back

85  An Assessment of the Economic Impact of the National Lottery 1987-1991, DKM Limited, April 1992, p 36. Back

86  QQ 270-271 Back

87  Q 270; Evidence, p 270. Back

88  Evidence, p 270; see National Gambling Impact Study Commission, www.ngisc.govBack

89  Q 185. Back

90  HC (1994-95) 569, 7 July 1995, pp 32-34. Back

91  Ibid, p 40. Back

92  HC Deb, 19 October 1998, col 919W; Department for Culture, Media and Sport press notice, 140/99, 17 May 1999; HC Deb, 27 October 1999, col 862W. Back

93  Q 11; Evidence, p 1. Back

94  Q 591. Back

95  Evidence, p 109. Back

96  Evidence, pp 8, 109. Back

97  QQ 379-380, 524-527; Evidence, p 8 Back

98  QQ 33-35, 41; Evidence, pp 24-25; see Memorandum from the BBC. Back

99  Evidence, p 107. Back

100  QQ 198, 460-462; Evidence, p 64. Back

101  Q 460. Back

102  Evidence, pp 6-7, 107-108. Back

103  Q 26. Back

104  Gambling and Problem Gambling among Young People in England and Wales, Dr Susan Fisher, Centre for Research into the Social Impact of Gambling, University of Plymouth, January 1998, p 1 (hereafter Gambling and Problem Gambling). Back

105  Ibid, p 6. Back

106  Ibid, p 4; Under 16s and the National Lottery, National Lottery Commission, February 2000, pp 49-50 (hereafter Under 16s and the National Lottery). Back

107  Q 465. Back

108  Under 16s and the National Lottery, pp 17-19. Back

109  Gambling and Problem Gambling, p 1. Back

110  Evidence, p 6. Back

111  Evidence, pp 6-7, 40-41, 47, 107-108. Back

112  QQ 470-472. Back

113  Evidence, pp 7, 40. Back

114  Q 469. Back

115  Evidence, pp 52, 67, 247, 257. Back

116  Evidence, p 245-246; Gambling Behaviour in Britain: Results from the British Gambling Prevalence Study, National Centre for Social Research, June 2000, p 59-62. Back

117  Q 26. Back

118  QQ 466-467. Back

119  Evidence, p 249. Back

120  QQ 26, 588-589. Back

121  HC (1992-93) 389, para 11. Back

122  QQ 427-429; Evidence, pp 8, 23, 158-164; The Income of Voluntary Organisations, Report on findings by NCVO, 2 March 2000. Back

123  Giving Without Strings, A Report from the SCVO Donated Income Working Group, SCVO, October 2000. Back

124  QQ 430, 433; see also The Income of Voluntary Organisations, Report on findings by NCVOBack

125  QQ 428, 430; Evidence, p 157; see also The Income of Voluntary Organisations, Report on findings by NCVOBack

126  Evidence, pp 138-141, 163-164, 265-266, 268. Back

127  Evidence, p 266. Back

128  Q 430; Evidence, p 163; The Income of Voluntary Organisations, Report on findings by NCVO, 2 March 2000, NCVO publications. Back

129  Q 391; Evidence, pp 266-267, 273, 275. Back

130  Evidence, p 9. Back

131  IbidBack

132  The Economic Value and Public Perceptions of Gambling in the UK, Business in Sport and Leisure, May 2000, pp 34-53. Back

133  Evidence, pp 63-65, 256. Back

134  HC (1992-93) 389, para 8. Back

135  Ibid, para 9. Back

136  QQ 235, 349; Evidence, pp 63, 68, 75. Back

137  QQ 242, 245; Evidence, p 63. Back

138  Q 350. Back

139  QQ 247, 261-263; Evidence, pp 63-64, 67-68, 70, 75; Revenue from Gambling Duties, Report by the Comptroller and Auditor General, HC (1999-2000) 352, 30 March 2000. Back

140  Evidence, p 65. Back

141  Q 248; Evidence, pp 69, 75. Back

142  Q 220; Evidence, pp 55-56, 254. Back

143  QQ 212, 216; Evidence, p 56. Back

144  QQ 222-226. Back

145  QQ 217-218. Back

146  Evidence, pp 55-57, 255-256. Back

147  QQ 202, 208; Evidence, pp 49-51. Back

148  Q 205; Evidence, p 49. Back

149  Q 202; Evidence, pp 49-50. Back

150  QQ 203, 206, 211; Evidence, p 49. Back

151  Q 206; Evidence, pp 51-52. Back

152  Evidence, p 251. Back

153  Evidence, pp 256-258. Back

154  Q 250; Evidence, pp 75, 258-259; HC (1995-96) 240-I, para 57. Back


 
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