Select Committee on Culture, Media and Sport First Report



Competition for the second National Lottery licence

51. The continued success of the National Lottery, particularly in providing income to good causes, depends on its next operator. The Commission, with the aid of consultants and having visited other state lotteries, evaluated the bids from Camelot and The People's Lottery.[155] The Commission launched the competition for the next licence with its statement of main principles, published on 29 July 1999, which described the process, timetable and basis for granting the next licence.[156] The final invitation to apply (ITA), published on 30 November, 1999, detailed the Commission's requirements from bidders.[157] In January 2000, the Commission announced that seven organisations intended to bid for the next licence. Mr Brian Pomeroy, then the Commission's Chairman said: "We have worked very hard to encourage competition because we think it will secure the best deal for players and for the good causes. We welcome these letters of intent to bid. It is a good sign that there could be strong competition."[158] By 29 February 2000, the deadline for submission of bids, the Commission had received two bids: from Camelot and The People's Lottery. According to the Secretary of State, only two companies, GTech and AWI, were capable of providing the software for the computer systems to run the United Kingdom National Lottery. He concluded that if "each of those companies has signed an exclusive agreement with a particular bidding operator, you inevitably end up in the situation that you have only two bids".[159]

52. The evaluation process differed from the first competition in several crucial aspects. The start-up period was extended from six months to a year because of the greater number of terminals that were required from the start of the next licence period. The Commission also required all bidders to provide new terminals from the start of the new licence, which, according to the Commission, "neutralised a significant advantage for the incumbent".[160] In addition, bidders were required to provide proposals for exploiting new technology. The calculation of the operator's profit was also altered to be more closely linked to the amount raised for good causes. The new licence would include provisions to improve the handover process, which had been omitted from the original licence.[161] The Commission also negotiated with the operator about providing bidders with access to information about the retail estate.[162]

53. The decision on the next operator was originally expected in June 2000 but was delayed until the Commission's announcement on 23 August 2000.[163] As a result of the delay in the decision, the current licence might have finished before a new operator could start operations. The Commission therefore entered into negotiations about an interim licence with Camelot that would allow the new operator sufficient time to prepare for handover of the Lottery.[164] The Commission's delay worried Lottery retailers and distributors, and caused Camelot logistical problems and The People's Lottery additional expense.[165] In accordance with the legislation, the operator had undertaken to maintain the marketing of the Lottery during the final period of the current licence.[166]

54. Mr Peter Hewitt, Chief Executive of the Arts Council of England, explained the distributors' concerns that a "hiatus" in the National Lottery "would be seriously problematic",

and would "undoubtedly have a significant effect on our operation".[167] The Secretary of State had guaranteed continuity during any changeover period.[168] However, the Commission was less inclined to give such a guarantee.[169]

The Commission's announcement of 23 August 2000

55. In the summer of 2000, the Commission decided that neither bidder had met the minimum requirements and invited both bidders to make the necessary improvements.[170] Having evaluated the additional information supplied by the bidders, the Commission again concluded that neither bidder met the statutory minimum requirements.[171] In light of that, the Commission decided that the bidding process was at an end.[172]

56. The Commission's announcement, on 23 August 2000, explained that it would start new negotiations with only one bidder, The People's Lottery.[173] In the attached Statement of Reasons the Commission explained why it had decided to exclude Camelot from the new process. The Statement explained that the Commission could not be "satisfied that the protection of the interests of every participant in the National Lottery is most likely to be secured by the grant of a seven-year licence to Camelot".[174] The Commission reached this conclusion on the basis of Camelot's relationship with GTech.[175]

57. The Commission asked The People's Lottery to provide a further, unequivocal guarantee of £50 million, available from a bank for the full seven years of the licence, and to show that there was complete segregation of the players' prize funds.[176] The Commission required the guarantee to cover any miscalculation of operating costs and any shortfall in the prize fund, and to support "the financial resources of the operation in their widest sense".[177]

58. The People's Lottery believed that "in the light of previous precedents ... our bid met the statutory criteria at that stage and was submitted on that basis".[178] In addition, Sir Richard Branson, Chairman of The People's Lottery, said that "the detail we had to sort out was the kind of detail that Camelot were able to sort out after they were given sole bidder status seven years ago".[179] He went on to explain that he interpreted the announcement of 23 August as "effectively the same thing as had happened last time when Camelot were given the licence and told to dot the 'i's and cross the 't's".[180]

59. On 23 August 2000, the Secretary of State said: "I welcome the robust way in which the National Lottery Commission has done the job of an independent regulator in rigorously analysing the two bids and look forward to a speedy and constructive conclusion to their further work."[181] The Secretary of State confirmed in evidence to us that he had welcomed "the fact that the regulator had been robust in reaching its conclusion that neither of the two bids as they then stood were right for the running of the future franchise of the Lottery".[182] He denied that his comments were unhelpful and said that "I was not ... in a position at the time to make a specific

judgement about the decision that [the Commission] had made to negotiate with only one of the two bidders".[183] It is interesting to note the contrast between the Secretary of State's praise of the "robust" decision on 23 August and the lack of equivalent praise for the decision on 19 December.

The judicial review

60. Camelot was excluded because of doubts about GTech's propriety, which the Commission did not consider the operator capable of rectifying in the time available.[184] Camelot, viewing the Commission's decision as unfair, felt that it "had to fight for a fair hearing".[185] Accordingly, the company sought, and was awarded, a judicial review, which hinged on the Commission's view of GTech and the implications for Camelot's status as fit and proper.

61. GTech had been involved in a number of instances in which its managers' actions were called into question.[186] The matter that had specifically concerned the Commission was the discovery and non-disclosure of a software fault by GTech.[187] In response to those concerns, several measures and undertakings were provided by Camelot and GTech.[188] The Commission, however, determined that there were "as yet unresolved concerns about the future long-term propriety of the arrangements made with GTech and between GTech and Camelot".[189]

62. The judicial review considered the meaning of correspondence between Camelot, the Commission and GTech. The court considered whether the Commission's concerns, and Camelot's undertakings in the correspondence, referred exclusively to the existing licence, or to the evaluation of the next licence.[190] The meaning of a letter from the Commission to Camelot on 28 July was discussed in detail.[191] That letter was "the very essence of the misunderstanding".[192] The Commission contended that its statement about GTech related to the current, not the future, licence, although it conceded that Camelot's interpretation of the letter as removing the difficulties relating to GTech for the purposes of propriety in relation to any future licence was understandable.[193] The judgement concluded that there was "a sound basis" for Camelot's understanding that concerns about GTech would not jeopardise its bid for the next licence.[194] Mr Harris, Chief Executive of the National Lottery Commission, clarified that the propriety tests for the current and future licence, when applied to the GTech issue, yielded two contrary answers, in that the Commission accepted GTech's involvement for the remainder of the first licence but not for the course of the next licence.[195] Lord Burns said that, even if Camelot had realised the implications of the letter, the Commission would have been unable to consider any rectification of the propriety issue with GTech as it was too late in the bidding process.[196]

63. Mr Justice Richards found that, although the Commission had tried to be fair, it had failed.[197] His judgement concluded that the Commission should allow Camelot "the same opportunity to allay its concerns by further negotiation as has been accorded to [The People's Lottery]".[198]

64. In the Commission's view, Camelot could not provide a suitable solution in the time available. The Commission mistakenly assumed that "there was not an alternative strategy, which is the one that Camelot made and argued in court and has subsequently provided".[199] However, the Commission received a list of action points from Camelot following the discussions about GTech, and the letter of 28 July responded to those points. The actions Camelot proposed at that time to rectify the situation with GTech did not include the actions it subsequently undertook, that is to change the relationship so that Camelot took over GTech in the United Kingdom and owned the software and employed GTech's staff to run the software.[200] The Government has since confirmed that it has received no information that would cause the Commission to find "not fit and proper" any directors or senior executives of GTech Holdings, or any staff of GTech UK involved in the operation of the National Lottery.[201]

65. The Commissioners received legal advice that it would be inappropriate, and open to challenge, were they to negotiate with both bidders after they had made the mistaken assumption that one of the bidders was already excluded.[202] The Commission did not feel that the advice it received was deficient.[203] In relation to the decision announced on 23 August, Ms Harriet Spicer, a National Lottery Commissioner, said that "there has been comment in the press about the extent to which the Commission turned to their lawyers on that occasion, in such a way that the whole issue of the mistake that was made was assessed in terms of legal advice. I would like to say, quite clearly, that one does not employ lawyers to take a decision for you; it was the Commission's judgement."[204] Clearly the legal advice received by the Commission was given in the light of a decision already taken by the Commission, and the consequences of that advice compounded the error already made by the Commission. The National Lottery Commission itself highlighted that it had acted in accordance with its legal advice in its announcement of the court's decision.[205]

66. Whatever the quality of the legal advice proffered to the National Lottery Commission, its decision to exclude Camelot from the process was the result of a fundamental error in failing to recognise that the relationship between the operator and its principal supplier could satisfactorily be altered.

Consequences of the judgement

67. In the wake of the judgement, the Commission instigated the further discussions with Camelot required by the court. The Commission came under intense criticism for its decision, and Dame Helena Shovelton, Chairman of the Commission, resigned. She attributed her decision not to the original mistake by the Commission but to the media coverage of that mistake and what she viewed as personal attacks on her.[206] The Secretary of State said that he had not sought Dame Helena's resignation and stated that he would have had confidence in her had she continued to serve on the Commission.[207] He described the qualities that he looked for in Dame Helena's replacement and found in Lord Burns, who was described by Camelot as "a man of great integrity with a tremendous reputation".[208] Lord Burns confirmed that he expected to remain at the Commission for his 12-month tenure as Chairman.[209]

68. The Commission has been accused of having insufficient skills to make the decision.[210] It is the Secretary of State's responsibility to ensure the Commission has the right qualities to undertake its task, and he rejected any implication that the members of the Commission were not up to their task.[211] Lord Burns was confident that the Commission had the competence to take the decision, although he conceded that the once-in-seven-year obligation was "a very, very big commercial decision ... It raises a lot of questions, there is a lot of attention given to it, and it is appointing a big contract."[212]

69. We do not consider the Commission to have had the relevant skills or expertise prior to the appointment of Lord Burns. The Government was fortunate that someone of his quality was available. In 1999, this Committee concluded that the process by which the Chairman of the Commission is appointed was unsatisfactory.[213] It has transpired that the failure of the Secretary of State to appoint someone to the Commission with the qualities required of the Chairman, prior to Lord Burns, was instrumental in the problems which arose during the selection process.

The Commission's announcement of 19 December

The decision

70. The Commission considered both bids again on the basis of the bidders' responses to the concerns raised by the Commission on 23 August, and announced on 10 November 2000, that both bids met the statutory qualifying criteria.[214] Having decided that both met the requirements for propriety and protection of players' interests, the Commission proceeded to apply the final test of income for good causes.[215]

71. On 19 December 2000, the Commission announced its decision that Camelot would be awarded the next licence to operate the National Lottery.[216] The press notice also announced that Hilary Blume, one of the Commissioners, had dissented from the decision and had tendered her resignation.[217] Attached to the announcement was the statement of reasons for the decision, which listed under various headings the Commission's views on the issues relating to the two bids. Lord Burns said that Camelot would be granted an interim licence and that the new licence would start "in the final days of January 2002".[218]

72. Sir Richard Branson stated in a press conference on 10 January 2001 that the decision in favour of Camelot was procedurally flawed and substantively unfair and was "a cowardly decision, made in a cowardly way on, to put it mildly, a dubious basis".[219] Sir Richard, however, said that The People's Lottery had decided not to contest the Commission's decision in court.[220]


73. According to The People's Lottery, a not-for-profit operator would enhance the reputation of the Lottery and encourage participation in it.[221] Sir Richard Branson told us that he believed that the impact of a not-for-profit operator would be a "feel-good factor" that would generate more sales.[222] Evidence on the importance of a not-for-profit operator on the propensity of people to buy lottery tickets is not conclusive.[223]

74. Camelot contended that a for-profit operator ensured an efficient "commercial approach".[224] The People's Lottery contended that it was capable of the same level of efficiency as derives from the pursuit of profit because staff would be motivated by the benefits of the Lottery for good causes and incentive payments for exceeding the forecast contribution to the National Lottery Distribution Fund.[225] The National Lottery is a commercial activity from which private companies will profit. This remains true regardless of whether the operator itself profits.[226] The test of a not-for-profit operator is whether it can keep its costs and efficiency at comparable levels with a for-profit operator. We believe that the primary issue is the efficient operation of the Lottery to maximise the amount of money to good causes rather than whether the Lottery is operated by a for-profit or not-for-profit licensee.

75. The Commission considered the cost structures in relation to costs and financial soundness.[227] Lord Burns said that the biggest difference between the two bidders' cost projections related to information technology. The Commission accepted that The People's Lottery would have lower technology costs but it was concerned that at lower levels of sales there was greater risk associated with costs in The People's Lottery's bid.[228] The Commission was also concerned about the lack of financial contingencies provided in The People's Lottery bid, because the company was "not carrying forward any surpluses and therefore, if there were adverse effects in future years, there was no cushion to deal with that".[229] The Commission stated that, if The People's Lottery's costs were higher than expected, the shortfall would come from contributions to good causes.[230] However, as The People's Lottery would add its profit element to the National Lottery Distribution Fund, for a given level of sales, additional costs would have to have exceeded 0.5 per cent of sales before reducing contributions to good causes below those of Camelot.

76. Camelot described how, although its shareholders were in some cases suppliers, it had worked hard to minimise the costs in its bid.[231] Camelot's annual overheads for the next licence were confirmed as 4.2 per cent of sales, which is £304.8 million on estimated annual sales of £7,296.2 million.[232] According to The People's Lottery, the cost savings in its bid, compared to Camelot's costs, represented an extra £1 billion for good causes over the course of the licence.[233] The People's Lottery claimed that it would have paid back the costs of its bid and setting up its operation from the first 18 months' income.[234]

77. The People's Lottery's £50 million guarantee had a dual role of covering an underestimate of costs and providing a guarantee for the prize fund.[235] However, the Commission concluded that "at levels of sales not far below £5 billion a year there is a real risk that The People's Lottery could incur losses which would not be sustainable within its proposed financial structure".[236] Both bids suffer to some extent from that risk but it is greater for a not-for-profit bidder.[237]

78. The Secretary of State considered it "perfectly possible" to have a not-for-profit operator, though such an operator would not have the contingency to cover increases in operating costs.[238] The controversy about Camelot's profits led to the following statement in the 1997 Labour Party manifesto: "When the current contract runs out, we will seek an efficient, not-for-profit operator to ensure that the maximum sums go to good causes".[239] The Secretary of State said the impetus for the manifesto pledge came from a "not unjustified feeling that the profit levels which were attached to the original bid ... were perhaps on the high side".[240] The White Paper, published in 1997, quoted that manifesto pledge under the heading of "A new approach".[241] Nonetheless, the 1998 National Lottery Bill did not mention a not-for-profit operator, but the Government said at the time that it was not abandoning its commitment and stated that "it has always been and still remains our intention to seek a not-for-profit operator ... There is no need to change the legislation to make this happen, but the key criterion for award of the licence is the money raised for the good causes".[242] Camelot had been assured by the Secretary of State that its for-profit status would not be a hindrance in the competition for the next licence,[243] but according to Sir George Russell, "it was quite obvious ... that the freehold [on the Lottery] was very weak".[244] Camelot's proposed profit margin for the next licence is approximately half that in the first licence.[245] The Secretary of State welcomed that lower profit level.[246]

79. The Secretary of State was adamant that the Government had fulfilled its pledge and added that he was not empowered to intervene in the process.[247] The Commission's competition documents stated that it would accept not-for-profit bids. However, the Commission could not attribute any weight to a not-for-profit structure in its deliberations, other than in the way in which it affected the bidder's financial viability.[248]

80. Sir Richard stated that "the Commission ... made it clear that they do not wish there to be a not-for-profit Lottery in this country".[249] The Commission's decision was not influenced by the fact that one bidder was not-for-profit, but was based on identifying what the Commission considered to be an unacceptable level of risk associated with the bid. We recommend that the Government consider the financial and cost implications of a not-for-profit operator, and if it concludes, as it has previously, that the National Lottery could have such an operator, then the Government should publish in time for the next competition its conclusions on how such an operating structure would work.

Ability to operate the National Lottery

81. The Commission felt that both bidders were capable of running the Lottery.[250] It accepted that The People's Lottery's would contract out more roles than Camelot and stated, in relation to technology, that there would "have been considerable potential to benefit the National Lottery if The People's Lottery had been chosen".[251] The Commission accepted that a change of technical systems implied risks but "did not regard the risks associated with a change of operator and systems as in themselves preventing it from awarding the licence to a new operator", although Lord Burns conceded that the process of installing the new terminals was "more straightforward" for the existing operator.[252]

82. Lottery technology seeks the optimum of flexibility and reliability. The People's Lottery's technological solutions appear to have been capable of delivering that optimum over the course of the licence. However, nowhere has there been a change of technology on the scale of that envisaged for the United Kingdom National Lottery.[253] The handover to a new operator would involve the selection and appointment of retailers, the purchase of terminals, their installation and testing, the training of staff and the establishment of a huge communications network. Mr Holley, Chief Executive of Camelot, described the changeover itself as involving "changing the communications, the computers, the procedures, the people all overnight and on the largest lottery in the world".[254] The People's Lottery would have had to install 25,000 online terminals and 11,300 Instants-only verifiers from the start of the new licence.[255] In order to achieve that, the company would have needed a full 12 months from winning the bid to install and test all the equipment.[256] The retailers were concerned that any new terminals would have to be easy to install and operate.[257]

83. The Commission visited state lotteries that had recent experience of converting from one system supplier to another, or of upgrading their systems.[258] In the United States, the Commission learned that a transition from one supplier to another did not necessarily incur substantial problems.[259] However, the Commission had been warned that "changeover was more risky and needed more time and more money ... than ... anticipated".[260] The Commission accepted that there were risks involved in changing the operator, but considered those risks to be manageable.[261] Camelot had undertaken to assist in the transition to a new operator.[262] Nevertheless, retailers were worried that the details of such a transition had not been discussed with them and that issues such as staff training, installation of new terminals and payment of prizes remaining under the previous operator had not been resolved.[263]

84. The use of new technology, such as the Internet and WAP mobile phones, was included in both bids.[264] According to Camelot new technology would enable players to be offered more games and more choice in how to play those games, but it stated that such technology should only be used "creatively, securely and responsibly".[265]

85. The Commission had encouraged the use of new technology in the bids but it did not consider the alternative, non-lottery uses of the terminals and network.[266] Both bidders stated that the terminals and network could be used for wider purposes.[267] The People's Lottery described a range of additional uses, including mobile telephony payments, television licensing, and social security payments. It also considered it possible to provide a voting function over the network.[268] These additional uses would, however, depend upon the enactment of amending legislation.

86. The Commission was satisfied with the financial strength and ability of both bidders' technological partners.[269] However, it found that The People's Lottery's technological proposals were better, but more risky when combined with the other risks that it identified with that bid.[270] The Commission decided that, although Camelot's systems were less modern and had associated risks, those risks were less critical, and it accepted Camelot's proposals to upgrade the current system.[271]

Game plans

87. The success of a lottery is determined mainly by its design—how easy or hard it is to win—the prize structure and the "take-out rate"—how much money is removed from the prize pool. The success of a game depends to a large extent on the probability of winning and the distribution of the prize money pool between the jackpot and the various lesser prizes. The People's Lottery's main proposal was for a change in the game matrix from 6/49 to 6/53. Camelot stated that 60 per cent of players prefer 6/49, as opposed to 7 per cent who prefer 6/53.[272] Increasing the size of the matrix would reduce the probability of winning from 1 in 14 million to 1 in 23 million.[273] The lower probability of a winning ticket would therefore lead to a higher probability of the jackpot rolling over to the following week.[274] Sir Richard explained how the 6/53 game would create more rollovers and, therefore, more excitement.[275]

88. Rollovers are essential for maintaining player interest and provide "free money" from the previous week's sales. However, if the game is too difficult, players tend to wait until the rollovers have produced a large jackpot and then play heavily. A large rollover can have a "halo" or "ratchet" effect, which increases the level of play in subsequent weeks. Camelot's early experience indicated that rollovers increased sales, which persuaded the Secretary of State to remove the restriction on the number of rollovers permitted.[276] Ms Thompson told us, in relation to Lottery Extra, that "when they have a rollover on average our sales go up by about 11 per cent".[277]

89. Camelot described the change of game proposed by The People's Lottery as very risky, and quoted the experience of state lotteries in the United States that had changed the game matrix from 6/49 to 6/53 and had subsequently suffered a decline in sales.[278] The changeover in Florida was used as an example of the difficulties associated with changes in game plan.[279] Ms Spicer referred to Florida's desire for big rollovers and said that the operator was "very distressed" when that had not happened.[280] Mr Burridge, Chief Executive of The People's Lottery, told us that the Florida lottery had seen an increase in sales after the change of game matrix, and that it was "thrilled at the results".[281] He agreed that such a change could lead to a reduction in sales if "other significant changes" are not made at the same time.[282]

90. Professor Walker stated that it was important that the game design matched the likely size of the market. He gave the example of the Israeli online game that had been redesigned from 6/49—a 1 in 14 million chance of winning—to 6/45—a 1 in 8.1 million chance of winning, "precisely because the operators felt that it was too difficult to win and rollovers were too frequent".[283] The People's Lottery supported the idea that the matrix size should match the size of the jurisdiction, and said that the 6/49 design had the "distinction of being the most popular game matrix in the world. It is principally used by the smaller jurisdictions ... like Massachusetts with a population of four million".[284]

91. Statistical analysis by Professor Walker and Ms Julia Young, of 6/49 against 6/53 yielded results that they described as "suggestive rather than predictive".[285] That analysis suggested that 6/53 would produce lower sales compared to 6/49 given the same prize structure and take-out rate. It is suggested that the 6/49 game would generate £10 million more sales per week than the 6/53 game. Changes to the prize structure and take-out rate might increase the sales of the 6/53 game, but would probably not be sufficient to increase sales to the level of the 6/49 game.[286]

92. The People's Lottery believed that it would operate the Lottery with more "flair and imagination" for game design.[287] It proposed other changes to the game design and portfolio, including, occasionally, a prize for matching no numbers.[288] The retailers were concerned that any new games should be simple enough for the public to learn quickly and that their staff should receive sufficient training.[289]

93. The Commission's statement highlighted difficulties with both bidders' proposals for game developments, including reservations about the performance of Camelot's Instants.[290] However, the Commission concluded that The People's Lottery's plans involved greater risk.[291] Lord Burns conceded that when considering the complexities of game design, "there is no simple statement that you can make such that the more rollovers the better, or the least rollovers the better".[292]

Expected sales

94. The Commission considered both bidders over-optimistic about average annual sales.[293] Lord Burns said that sales levels were "running at something like £5 billion a year".[294] He saw no reason for there to be a major shift in that level and estimated total sales for the next licence period to be in the order of £35 billion.[295] Both bidders estimated that they would contribute £15 billion to good causes over the licence period, which would suggest sales of around £50 billion. The Commission considered that there was scope for higher individual spend on the Lottery without compromising the protection of players.[296] The Commission concluded that there was more uncertainty in relation to the achievable sales for The People's Lottery than for Camelot.[297]

95. The £15 billion for good causes that both bidders believed they could deliver would require an almost 50 per cent increase in Lottery sales. Such an increase would require either an increase in the average player's weekly expenditure on the Lottery, or an even greater proportion of the population being prepared to play regularly. The first requirement would be unwelcome, the second unlikely. This Committee therefore shares the Commission's scepticism about the levels of sales.

Contributions to the National Lottery Distribution Fund

96. The People's Lottery offered higher contributions to the Fund, and Sir Richard Branson said that the Commission had accepted that The People's Lottery would generate "about 6.9 per cent more for good causes which equates to over £1 billion in extra revenue for good causes".[298] The Commission conceded during the judicial review that The People's Lottery would produce more money for good causes.[299] However, the Commission's reservations about forecast sales led it to conclude that the differences between the bidders were small "in relation to the range of uncertainties surrounding the projections and the total amounts at stake".[300] Lord Burns stated that the Commission did not assume that the two bidders would have equivalent levels of sales.[301] The Commission's evaluation of income generated for good causes also considered the risks of technical breakdowns which might affect that income.[302]

97. Overall the Commission concluded that Camelot would deliver more sales over the licence period and that the accumulation of risk inherent in The People's Lottery bid was "uncomfortably high" compared with that of Camelot.[303] The Commission therefore awarded the licence to Camelot. Sir Richard implied that the outcome of the selection process was related to a decline in sales. However, Lord Burns did not feel that the selection process had tarnished the Lottery.[304]

98. Many aspects of the Lottery's operation have associated risks and the Commission's decision came down to balancing the level of risk associated with the two bids.[305] Lord Burns was coy about whether being risk averse was a vice or a virtue.[306] The National Lottery has more to lose than to gain by indulging in the risks that innovation brings. If the price of reliability is less innovation in the Lottery's operation, it is a price worth paying. Camelot has a proven record of running the Lottery. That reliability is paramount because the implication of failure is the huge loss of revenue for the good causes.

155  QQ 306, 319-320, 323-325, 546, 571-573; Evidence, pp 101-102; see Memorandum from the National Lottery Commission, Annex L, Expert AdviceBack

156  Evidence, p 101; see Statement of Main PrinciplesBack

157  Evidence, p 101; Memorandum from the National Lottery Commission, Annex B, Invitation to ApplyBack

158  National Lottery Commission press notice, 01/2000, Commission says there are seven possible bidders to run the next National Lottery, dated 8 January 2000. Back

159  Q 640. Back

160  Evidence, p 102. Back

161  Ibid; Memorandum from the National Lottery Commission, Annex L, How the process and conditions differ from 1994Back

162  Evidence, p 102. Back

163  Evidence, pp 11, 102. Back

164  QQ 7, 60, 371. Back

165  QQ 4-7, 60, 381-384; Evidence, p 39; Statement by Sir Richard Branson, 10 January 2001. Back

166  QQ 14, 62. Back

167  QQ 381-382. Back

168  HC Deb, 11 December 2000, col 341. Back

169  QQ 332-333. Back

170  Q 538; Evidence, p 102. Back

171  Q 327; Evidence, p 102. Back

172  Q 563; Evidence, p 102; National Lottery Commission press notice 13/00, Neither Bid Meets Statutory Criteria, dated 23 August 2000, (hereafter NLC press notice, 23 August 2000). Attached to this press notice is the National Lottery Commission's Summary of Reasons for its decision of 23 August 2000 (hereafter Statement of Reasons, 23 August 2000). Back

173  NLC press notice, 23 August 2000. Back

174  Statement of Reasons, 23 August 2000, para 25. Back

175  Statement of Reasons, 23 August 2000Back

176  Q 147. Back

177  QQ 312-313. Back

178  Evidence, p 27. Back

179  Q 101. Back

180  QQ 102, 147. Back

181  Department for Culture, Media and Sport press notice, 218/00, Statement by Culture Secretary Chris Smith on the NLC Announcement on the Award of the Next Lottery Licence, dated 23 August 2000. Back

182  Q 635. Back

183  QQ 635, 693. Back

184  QQ 326, 365. Back

185  Q 9. Back

186  See Statement of Reasons 23 August 2000, paras 9-17; see also Memorandum from David Miers, Regulatory and Market Problems in the Provision of Commercial Gambling in Great Britain: The Background to the Gambling ReviewBack

187  National Lottery Commission press notice 08/00, Investigation into Allegations Made About Lottery Software, dated 20 May 2000; National Lottery Commission press notice 09/00, Independent Investigation into Software Allegations About the National Lottery, dated 26 May 2000. Back

188  Statement of Reasons, 23 August 2000, paras 9-17. Back

189  Ibid, para 17. Back

190  Judgement of the Hon Mr Justice Richards in the High Court of Justice, Queen's Bench Division, CO 3085/2000, dated 21 September 2000, paras 17-20. Back

191  Ibid, paras 19-20; Evidence, p 11. Back

192  QQ 360-361. Back

193  QQ 361-363. Back

194  Judgement, CO 3085/2000, dated 21 September 2000, para 76. Back

195  Q 364. Back

196  QQ 364, 369. Back

197  Q 9; Judgement, CO 3085/2000, dated 21 September 2000, paras 69-70, 84. Back

198  Judgement, CO 3085/2000, dated 21 September 2000, para 86. Back

199  Q 365. Back

200  QQ 366-367. Back

201  HC Deb, 25 January 2001, col 693W. Back

202  Q 325. Back

203  Q 359. Back

204  Q 325. Back

205  National Lottery Commission press notice 15/00, Statement by the National Lottery Commission, dated 21 September 2000; National Lottery Commission press notice 16/00, Statement by the National Lottery Commission about the Outcome of the High Court Hearing and Future Negotiations with Camelot, dated 21 September 2000; Back

206  National Lottery Commission press notice, 18/00, Statement by the National Lottery Commission: Dame Helena Shovelton, dated 4 October 2000. Back

207  QQ 642-644. Back

208  QQ 9, 641. Back

209  Q 545. Back

210  Q 280. Back

211  QQ 652, 654; See Memorandum from the National Lottery Commission, Annex L, Biographies of National Lottery CommissionersBack

212  Q 295. Back

213  HC (1998-99) 506-I, para 29. Back

214  National Lottery Commission press notice, 24/00, Commission announces its decision on the next National Lottery licence, dated 19 December 2000 (hereafter NLC press notice, 19 December 2000), Statement of Reasons for the Decision of the National Lottery Commission on the Grant of a Licence to Run the National Lottery, para 5, (hereafter Statement of Reasons, 19 December 2000). Back

215  QQ 327-328; National Lottery Commission press notice, 23/00, New Lottery Bids Go to Next Stage, dated 10 November 2000. Back

216  NLC press notice, 19 December 2000. Back

217  Ibid, Statement by Hilary BlumeBack

218  QQ 7, 60, 575. Back

219  Speech by Sir Richard Branson, 10 January 2001. Back

220  IbidBack

221  Evidence, p 26. Back

222  QQ 98-99, 150. Back

223  Q 281; Evidence, pp 89-90. Back

224  Q 16. Back

225  QQ 105-107. Back

226  QQ 21, 79, 136-137. Back

227  Q 309. Back

228  Q 551; Statement of Reasons, 19 December 2000, para 25. Back

229  QQ 551-552. Back

230  QQ 310-311. Back

231  Q 96. Back

232  Evidence, p 23. Back

233  QQ 109, 137; Evidence, p 36. Back

234  QQ 112-114, 147. Back

235  Q 312. Back

236  Statement of Reasons, 19 December 2000, para 30. Back

237  QQ 309-310, 311. Back

238  QQ 656-657, 664. Back

239  Labour Party Manifesto, April 1997. Back

240  Q 663. Back

241  The People's Lottery, Cm 3709, July 1997, p 28. Back

242  HL Deb, 18 December 1997, col 731. Back

243  Q 17. Back

244  Q 14. Back

245  Q 49; Evidence, p 23. Back

246  Q 669. Back

247  QQ 645-646, 651, 667. Back

248  Q 298. Back

249  Speech by Sir Richard Branson, 10 January 2001. Back

250  Q 563. Back

251  QQ 129, 132, 321-322; Statement of Reasons, 19 December 2000, paras 12-13. Back

252  Q 582; Statement of Reasons, 19 December 2000, para 14. Back

253  QQ 8, 340. Back

254  Q 59; Evidence, pp 3-4. Back

255  Q 142. Back

256  Q 143. Back

257  QQ 175-179. Back

258  QQ 335-340; Evidence, p 101. Back

259  Q 340. Back

260  Q 560. Back

261  Q 567. Back

262  Q 14; Evidence, p 102. Back

263  QQ 166-167, 169, 180; Evidence, pp 39-40. Back

264  QQ 22, 122, 303; Evidence, pp 5, 26. Back

265  Evidence, p 5. Back

266  Q 566. Back

267  QQ 83-85, 103. Back

268  Q 103; Evidence, p 233. Back

269  QQ 557-559. Back

270  Statement of Reasons, 19 December 2000, para 14. Back

271  Q 565. Back

272  Evidence, p 5. Back

273  Evidence, p 77. Back

274  Evidence, pp 77-78. Back

275  Q 151. Back

276  HC (1994-95) 240-II, p 47; See Memorandum from the National Lottery Commission, Annex C. Back

277  Q 12. Back

278  Q 63. Back

279  IbidBack

280  Q 560. Back

281  Q 111. Back

282  IbidBack

283  Evidence, p 78, footnote 8. Back

284  Q 111. Back

285  Evidence, p 89. Back

286  Q 276, 278; Evidence, pp 87-89. Back

287  Q 100. Back

288  QQ 151-153, 156; Evidence, p 27. Back

289  QQ 166-167. Back

290  Statement of Reasons, 19 December 2000, paras 15-18. Back

291  Ibid, para 18. Back

292  QQ 317-318. Back

293  Statement of Reasons, 19 December 2000, para 20; Statement of Reasons, 23 August 2000, para 27. Back

294  Q 591; Statement of Reasons, 19 December 2000, para 19. Back

295  Q 591. Back

296  Q 592. Back

297  Statement of Reasons, 19 December 2000, para 7. Back

298  Q 99. Back

299  Judgement CO 3085/2000, dated 21 September 2000, para 53; Statement of Reasons, 19 December 2000, para 8. Back

300  Statement of Reasons, 19 December 2000, para 23. Back

301  Q 314. Back

302  Q 300. Back

303  Statement of Reasons, 19 December 2000, para 8. Back

304  Q 370. Back

305  QQ 353, 374. Back

306  Q 553. Back

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Prepared 12 March 2001