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19 Dec 2001 : Column 92WH


11 am

Mr. Christopher Chope (Christchurch): The debate comes at a good time, because Camelot's new licence starts on 27 January 2002, by which time it will have a new chairman in Michael Grade, and the Government are considering their response to the recommendations in the Budd report on gambling. It is rumoured that next spring the Government will start a review of national lottery legislation that is relevant to the new licence that will start in 2009. That seems a long way ahead, but if we are to reach agreement on the legislative changes that will have to be implemented in time for bids for a fresh lottery licence to be invited on that new basis, we have to start quite soon.

The lottery licence runs to 164 pages. I shall not dwell on much of it, but emphasise two parts—condition 12, which relates to player access, and condition 15, which relates to distribution management.

Condition 12 requires that there should be a minimum of 24,250 online retail outlets and a minimum of 9,150 Instants-only outlets. For reasons that are not stated, in 2006 those minimums will be reduced to 23,750 and 4,500. I hope that the Minister can explain why the Government imposed the relaxation of that condition.

Condition 15 states:

Those criteria must be available for public inspection. I submit that Camelot is not applying fair criteria for the selection and deselection of retailers, especially with the introduction of a minimum sales requirement of £1,500 per week. For Camelot, "reviewing the retail network" is tantamount to

I shall illustrate my point with reference to the case of Mr. and Mrs. Smith, who run a small retail newsagents and tobacconists in Wimborne road, east in Ferndown. They sell between £1,000 and £1,200-worth of lottery tickets each week and have been told that if they do not raise their sales to £1,500 each week they will have their lottery licence taken away. As one would expect, before the licence is taken away they will be offered a period of counselling lasting 24 weeks to show them how to boost sales. Since they have spent the past seven years running their shop, the idea that somebody else can come in from outside and tell them how to do it better is surprising. Of course, at the end of the 24 weeks they will realise that they cannot magically increase their sales to £1,500 and will therefore lose their licence.

Some retailers are under the impression that the lottery licence imposes a maximum number of outlets for Camelot. Indeed, that is such a widely held misconception that a senior member of one of the national trade organisations recently repeated it to me. But the licence does not do that—it specifies a minimum. Why does not an organisation that wishes to maximise sales of lottery tickets and proceeds for good causes seek to expand, rather than contract, its network of retailers?

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It costs about £5,000 to install a lottery terminal, but after that the running costs are negligible. If the cost of installation is a problem, that has already been incurred because a condition of the new licence was that Camelot had to install 24,500 new terminals at a cost, I am told, of £120 million. That was to ensure that they could be operational before 27 January. If ever there was an example of a waste of money, that is it. The existing lottery terminals were perfectly adequate, but to establish a level playing field for the bidders of the new licence, the requirement was that whichever company won—even if it were the incumbent—would have to replace all terminals. That is a waste of £120 million.

What justification can there be for imposing an arbitrary minimum sales requirement? Provided that a lottery retailer's premises are open during the hours in which the public want to purchase tickets, and that the retailer acts with honesty and propriety, what is the problem? Mr. and Mrs. Smith have a supporting petition with 1,400 signatures. They have raised their concerns on radio and television, and during a Radio Solent phone-in, they received an unparalleled 98 per cent. support for their cause to be allowed to continue to retail lottery tickets from their shop.

Mr. and Mrs. Smith have wondered whether there are too many lottery outlets close by in Ferndown. However, that cannot be the problem, because Tesco, Sainsbury and one independent supermarket have outlets on Ringwood road, while Mr. and Mrs. Smith's outlet is the only one on Wimborne road. I have discussed the issue with the Federation of Small Businesses and the Federation of Retail Newsagents. Both are worried about the adverse impact of Camelot's policies on the retail network of small shops. The FSB told me:

However, the trend is the other way, with Camelot favouring supermarkets, petrol forecourts and other multiple outlets. The Government have given the impression that they are not concerned about the retail network and I secured this Adjournment debate as a result of the negative response from the Minister to my questions. I hope that in today's response, he will link his remarks in with the Government's response to the better regulation taskforce shopkeepers' report, published on 17 October. In paragraph 3.1, the Government state:

He has a good opportunity to start fulfilling his role as champion of small retailers by challenging Camelot on its unfair review of the retail network.

The Minister should make the point to Camelot about the lack of incentive, under the present arrangements, for a small retailer to build up his lottery sales so as to add value to his business for when he retires or sells out. Why are lottery licences not transferable on a similar basis to liquor licences? No publican or licensee has an absolute right to transfer a licence because the transfer must be approved by the court, but the norm is that, where the transferee is a fit and proper person, the transfer takes place. Why does Camelot not operate a similar system for its licensed lottery retailers, who

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would then have an additional incentive to build up their retail business? Camelot told me that its objective in reviewing the retail network is to maximise income for good causes, but closing down outlets, rather than opening more, seems an odd way to go about it.

Miss Anne McIntosh (Vale of York): I have much sympathy with my hon. Friend's argument. Does he agree that the pressure on Camelot to contribute to good causes—I shall explore the reasons for that later—puts pressure not only on the organisation but on individual licensees such as Mr. and Mrs. Smith?

Mr. Chope : My hon. Friend makes a good point, but if the pressure is on Camelot, it is self-induced. Both Camelot and Mr. Branson's People's Lottery said that they could raise £15 billion for good causes during the lifetime of the new licence. The National Lottery Commission reckons that £10 billion is more realistic and, as my hon. Friend knows, £10.7 billion has been raised since the lottery started. The details of the licence show that there are no penalties on Camelot if it does not succeed in selling enough tickets to raise £15 billion for good causes, although it would not make as much profit as it would otherwise do, so there no justification for putting this enormous pressure on small retailers.

Small retailers are being made scapegoats for the steady decline in sales of lottery tickets. It was reported on 28 November that combined sales of lottery tickets and scratch cards fell by 5.4 per cent. to £2.4 billion in the six months to 30 September. Sales would have plummeted further but for a 6.8 per cent. increase in scratch card sales. Why are sales of lottery tickets falling? Could it be that there is increasing disillusion about the so-called good causes that the lottery supports? Today's news reminds us that £628 million of lottery money was wasted on the dome; some £120 million was given to the Football Association for Wembley stadium, which will not now be spent on that project; some £20 million was given to the royal armouries, which then went bust. Could it be that potential purchasers of lottery tickets realise that very little of the money they might spend would be used for what they believe to be good causes, and that even less is returned to their local communities?

On 11 December, total lottery sales since the launch on 14 November 1994 were £35.2 billion. Camelot has been unable to break down that figure between constituencies, but if the gross sum is divided by 659 constituencies, the average is £53.3 million per constituency. I am not making allowance for the fact that my constituency of Christchurch has a slightly larger number of constituents than average and a higher proportion of people in the older age group, who are apparently more likely to buy lottery tickets. We are told that people aged between 55 and 64 are most likely to do so, while young people aged between 16 and 20 are least likely to do so.

Taking the average, £10.7 billion has been raised for good causes and if good causes in the Christchurch constituency had received a pro rata share, they would have received £16.21 million. It will not surprise you, Mr. Amess, to know that they have not received anything approaching that amount. Indeed, the information that Camelot provided to me and other hon. Members this week, broken down by constituency,

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shows that the amount that has been given in national lottery awards to Christchurch is £3.9292 million—that is, less than 25 per cent. of the pro rata entitlement and less than 7.5 per cent. of the total sales of lottery tickets in Christchurch.

My constituents are contributing grossly disproportionately to good causes, and not-so-good causes, elsewhere in the country, and they now find that Camelot is trying to undermine the viability of small retailers in Christchurch through its retail network review. If Camelot wants to boost lottery ticket sales in Christchurch, I suggest that it puts pressure on lottery distributors to return more than 7.5 per cent. of gross sales to good causes in Christchurch. I have examined the figures for the past four years since 1 January 1998. During that period, my constituents have had just over £400,000 returned from the lottery—less than 1.5 per cent. of their gross expenditure on lottery tickets—and some £145,000 of that was given to an organisation called Adelphi Playclubs Ltd., which has gone bust and is in receivership. Is it surprising that there is growing disillusionment among my constituents and others about the way in which the lottery operates? I advise my constituents that, if they want to support local good causes, the last thing that they should do is play the national lottery.

That brings me to the Budd review of gambling, and the absurd letter from Camelot that I received this week that said that good causes in Christchurch would suffer to the extent of £500,000 if the recommendations for society lotteries were adopted. The reality is quite the reverse. If the people of Christchurch raised £53 million through a society lottery and a minimum of 20 per cent. had to be returned to good causes, as is proposed, Christchurch's good causes would be three times better off overall and 10 times better off than over the past four years.

Society lotteries have an important role to play. They could introduce competition, which is severely absent at the moment. Society lotteries are public lotteries promoted on behalf of a society that is established and conducted wholly or mainly for one or more of the purposes that are set out on page 156 of the Budd report. Those purposes are effectively charitable, and include sport, recreation and the arts.

Under present regulations, society lotteries may have prizes of up to 55 per cent. of their income. However, no prize may exceed £25,000 or 10 per cent. of ticket sales. It is not possible for an individual society lottery to have ticket sales that exceed £1 million. A minimum of 20 per cent. of the funds must go to deserving good causes.

There is much to be said for society lotteries, yet Camelot says that if society lotteries were introduced with larger prize payouts and the ability to attract gamblers who aspire to a lottery win that would be a life-changing event, sales would increase. However, owing to the language of Camelot's scaremongering letter, hon. Members may be surprised to hear that the figures for 1999-2000 show that for every £1 spent on the national lottery, only 2p was spent on society lotteries. Even if society lotteries increased twentyfold, they would take less money than the national lottery.

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Society lotteries could introduce the element of competition that is lacking. Retailers that are not permitted to sell tickets for Camelot could sell tickets for the local society lottery. If local people felt that Camelot and the national lottery distribution organisations were not giving their local causes a fair share of the resources raised, they could show their disapproval by supporting the local society lottery rather than the national lottery.

That recommendation in the Budd review is worthy of adoption as a Conservative party policy, although I do not expect my hon. Friend the Member for Vale of York (Miss McIntosh) to announce that in her response. I certainly hope that the Government will not fall for the extraordinarily protectionist line taken by Camelot in the literature that was sent to hon. Members this week.

Anybody would think that Camelot was not given the opportunity to make a submission to the Budd review. It made a written submission, and its comments must have been taken into account. Indeed, great passages in the Budd report show that Camelot's concerns about the impact of society lotteries are not well-founded. It is recognised that the advent of society lotteries could mean that a different range of good causes would benefit. However, the notion that there would be a reduction in the amount of money going to good causes overall is rejected.

Before I close my remarks, I want to say a little about the part of the Camelot licence that deals with under-age sales—condition 15(4). Under that condition,

A requirement exists that there should be a minimum of 10,000 such tests each year. We are told that Camelot has invested £1.2 million over the past two years in the prevention of problem gambling in the national lottery. On the basis of the evidence produced, it has not been successful in dealing with the problem. That problem centres around scratch cards, which are described by Camelot as

The odds of winning on a scratch card are about one in five. Most significantly, however, 96 per cent. of the scratch card market is taken by Camelot.

The National Lottery Commission has commissioned a report on under-16s and the national lottery. That report was dated February 2000, and was prepared by BMRB Social Research. It contains some interesting points. It shows that 11.6 per cent. of 12 to 15-year-olds had spent their own money on national lottery scratch cards in the previous week. That was in 1999, when the research was carried out, whereas in 1997 the figure was 7.7 per cent. Therefore, a substantial and steep increase had taken place in the incidence of people under the age of 16 illegally purchasing scratch cards. The report also found that 60 per cent. of problem gamblers agreed that it was easier to spend more money than they planned on national lottery scratch cards—61 per cent. agreed that some people are hooked on them.

For a Government who preach about social inclusion, the report contains some pretty devastating findings. For example, table 8c deals with the prevalence of problem gambling on national lottery scratch cards among key sub-groups. Looking at the issue of

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ethnicity, it shows that 1.6 per cent. of white youths are engaged in problem gambling with scratch cards—Instants—compared with 4.8 per cent. of blacks, and 3.8 per cent. of Chinese. We know that gambling is more a part of Chinese culture than British culture, but it is surprising and alarming that 4.8 per cent. of under-16s from black ethnic minorities are engaged in problem gambling with scratch cards.

Camelot is promoting scratch cards, which is why sales of scratch cards went up over the past six months while sales for the main lottery draw went down. We know that young people have the highest propensity to purchase scratch cards. It is not an exaggeration to say that we are now looking at state sponsorship of under-age gambling. Such gambling is becoming worse, and it will become worse still if pressure is put on small retailers to attain minimum sales targets. How will they be able to increase their sales? They will be under tremendous pressure to sell more Instants scratch cards to the user group that enjoys them, namely the under-16s.

The issue is important, and is relevant to the retail review. Camelot has informed me that, in my Christchurch constituency, not one lottery retailer has lost his licence as a result of selling scratch cards to under-age people. However, I doubt whether that is the position throughout the country.

At page 413 of his autobiography, John Major wrote:

Recent experience in my constituency shows that the lottery is no longer delivering that vision. The current pressure from Camelot on small retailers and its monopolistic resistance to competition from society lotteries will be a further blow to the "little platoons".

11.26 am

Mr. Richard Page (South-West Hertfordshire): I congratulate my hon. Friend the Member for Christchurch (Mr. Chope) on securing the debate. I do not know how long it took him to obtain an hour-and-a-half debate, and I do not want him to tell me, because the last time that I tried to achieve such a debate, it took me about six months and that burnt on my soul.

I have always been a firm supporter of the lottery. Having been in the House for several years, I have discovered that if I stand still long enough the wheel will turn and the same scenery will go by again, at which time I can evaluate and compare what happened the previous time with what is being proposed now. At the time of the first contest for the lottery licence, I studied all the applicants. Without any doubt, Camelot was the most efficient and effective. It presented its case in the best manner. The worst applicant was the noisiest, and I leave it to hon. Members to work out which one that was. I had an added interest in that at least two of the applicants were to establish their headquarters on the edge of my constituency between Rickmansworth and Watford. I hope that they stay there for a considerable time.

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Camelot's is one of the world's most successful lotteries. Apparently, it launched itself to the outside world without a hitch and it worked smoothly. It then started to be knocked in the media, because it had brought out some of the worst characteristics of the British. The lottery was not knocked because it was doing so well, but some of the personalities involved were criticised for unjustifiable reasons. A characteristic of the British is that, if someone does well at something, we must have a go at it. However, I am wearing my Christmas tie, and given that seasonal charity has overcome me, I shall not labour that point.

I worried from the start about the Government's action, which widened the scope on which lottery moneys could be spent. My hon. Friend the Member for Christchurch touched on the expenditure on the dome. If anyone wanted to be turned off buying lottery tickets, to see the money squandered in such an horrendous fashion was ample justification for that. We do not know exactly what is happening about the dome's future—whether it has been given away or it is a special deal. We would love to hear the inside story. Perhaps the Minister will bring us up to date—and get himself some headlines—but I have a funny feeling that he will avoid discussing that problem.

The lottery suffers because it has a series of distribution bodies—they are listed in a document that Camelot has sent to hon. Members. All those bodies run publicity schemes and profiles, in which they seem to go out of their way to say, "Actually, our money comes from the national lottery." They seem to present it as their money, which reminds me of the way that the Millennium Commission—that glorious success—spent its money.

A parallel can be drawn with the European Union. When one drives around certain parts of the country, one sees lots of big blue boards adorned with a circle of gold stars and the slogan, "Project funded by the EU." There are never any brackets underneath containing the message, "By the way, it is your own taxpayers' money coming back to you." Similarly, some of the distribution organisations associated with the national lottery are not fulsome about stating that they are fuelled by lottery money—good causes money.

I have a wish list. The operation of the application process for the second licence was a shambles, and we must thank Lord Burns for rescuing the day by producing a result that got everything back on an even keel. We must ensure that that does not happen again. I do not know whether that can be achieved through the review of legislation that will take place, or through some form of internal diktat; I leave that decision to the Government. However, I wish clear-cut rules and procedures to be established before the third round of licensing applications takes place, because we cannot allow that appalling situation to occur again. It put the future of the lottery in doubt, and it did not give it a good image. That had nothing to do with the applicants for the licence; it was caused by the Government's attempt to control the way in which the licence was allocated.

Let me deal with new licences and the issue of timing. When the licence comes up for review, the entire staff of the operating company—which, in this case, was Camelot—get jittery about their future. Immediately before the review of its licence, Camelot had to spend a

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lot of money on bonuses to stop people going when it was thought that the company might lose its licence. Would it be possible for the people in charge of the application process to have closer discussions with the lottery operator, in order to reassure those working for it? Perhaps the new operator should be chosen much earlier, so that it could promise the old operator's staff jobs. That would ensure continuity of, and greater security for, staff.

Although I have been critical of the Government, I now congratulate them on going ahead with the betting review by sir Alan Budd, because it is excellent. Slot machines are the only problem. If that aspect were allowed to come through, it would ruin every British Legion club in the country.

The Minister for Sport (Mr. Richard Caborn) : And Conservative clubs as well.

Mr. Page : The Minister is right: it would have a little impact on Conservative clubs as well. Perhaps there are slot machines even in Labour clubs, though not as many. [Interruption.] I am sorry, Mr. Amess, I am suffering, and I am finding it hard to go on because of my voice.

Gambling is a billion-pound industry throughout the world. This country has some of the most reputable bookmaking systems in the world and could receive a big chunk of overseas business.

Miss McIntosh : Does my hon. Friend share my embarrassment for the Minister, who, after a debate on the subject, felt unable to visit the Labour clubs in his area because of the validity of that point? He was too embarrassed to go.

Mr. Page : I thank my hon. Friend for causing what is known in American football as "interference". It gave me a chance to take a sip of water and get my voice back.

This country has a reputable gambling industry, and it is a business that can go forward. I welcome Sir Alan Budd's work on that industry and should like to make a couple of points before I collapse. First, the lottery operator should not be blamed for a fall-off in sales. If extra gambling opportunities are introduced, those should be taken into account. Secondly, Camelot should rethink its review of the retail network, because in some villages, just as the post office is under attack, the removal of lottery machines from small shops would have a disastrous impact on village life, which we want to keep going.

I have no objection to competition in the gambling industry—that is part of the industry's ethos—but I am concerned about side betting, which rides on the lottery's work and profile. Side betting would be damaging for Camelot and any other lottery operator. Only in Ireland is it legal; in the rest of the world, it is not.

11.37 am

Nick Harvey (North Devon): In introducing the debate, the hon. Member for Christchurch (Mr. Chope) focused on three issues: retail distribution of lottery tickets, under-age purchase of tickets, and the Budd report. I shall comment on each of those.

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The National Lottery Commission grants Camelot a licence that requires it to provide a terminal for each postcode district within which there are at least 2,000 residents. Camelot must also make available for public inspection its criteria for selecting, or deselecting, the retailers that it uses. It is up to Camelot to exercise its commercial judgment in applying those criteria, and the commission is responsible for overseeing that.

It is legitimate for the hon. Member for Christchurch to raise the specific example of Mr. and Mrs. Smith of Ferndown or any other example. However, whether the Minister can reasonably be held accountable for every decision that Camelot makes in exercising its commercial judgment is another question. I look forward to hearing what the Minister has to say about that.

There are 25,000 online lottery terminal operators and a further 10,000 scratch card retailers, so it is fair to say that Camelot reaches most parts of the country. Particular provisions are in place for sparsely populated areas that might not otherwise fulfil Camelot's commercial criteria. Reference has been made to the award of the second licence and certainly, as the hon. Member for South-West Hertfordshire (Mr. Page) said today, and as the Select Committee said at the time, that process was a shambles. The national lottery licence is a licence to print money and is, in that sense, a state-backed monopoly. It is interesting that the main business of De La Rue—one of the major stakeholders in Camelot—is printing money. The licence requirements must be taken seriously and drawn up carefully.

Despite the criticism that it has attracted, notably for some of the payments made to its directors, Camelot is one of the best lottery operators in the world. I noted the criticisms made by the hon. Member for Christchurch, but I am not sure that they are fair. A 1998 survey showed that Camelot was returning more to good causes—and, indeed, to the Treasury—as a percentage of sales than any of the other 34 lotteries that were monitored. The salaries of its board members have been trimmed. Despite falling sales, the proportion of income that goes to good causes continues to increase. As part of its social and ethical audit, bonuses have been reduced to a uniform level and linked to the national lottery distribution fund. Camelot operates on a margin of 1 per cent. That is worth remembering when people criticise it.

Despite its problems, Camelot has been a successful operator and it is against that background that we should judge the proposals in the Budd report. The hon. Member for Christchurch welcomed its recommendation that the monopoly should be broken, allowing others to compete with Camelot. Camelot has been stoically defending its position, and has argued that exposure to competition would be unwelcome. I urge the Minister to weigh up carefully that argument before proceeding.

The hon. Member for Christchurch was cavalier in his dismissal of Camelot's argument. I do not swallow hook, line and sinker everything that Camelot has said in its defence, but there are arguments that need careful consideration. A deregulated lottery market would probably be dominated by large national organisations with the means to invest in the relatively high capital and operating costs, and the strength to compete with the

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national lottery. The Budd report recommends that commercial companies should not be allowed to operate in competition with the national lottery. However, charities that are large enough to do so on a meaningful scale would, to all intents and purposes, be operating in the same way as a commercial company.

Camelot passes on a high percentage of its revenue to good causes. The Budd report proposes that competing companies would be required to guarantee distribution of 20 per cent. of their ticket sales. That is considerably less than the 40 per cent. that Camelot distributes. There is a genuine threat that, in total, the sums that find their way through to good causes would be smaller. Even if the variety of good causes that were benefiting was more widely drawn than at present, we risk diluting what we can achieve with the moneys.

Mr. Chope : I know that the hon. Gentleman listened carefully to what I said. In Christchurch, significantly less than 5 per cent. of gross sales is being returned to recognised good causes in the local community. Does the hon. Gentleman accept that it would be much better for the people of Christchurch to have the option of spending money on a lottery that delivered 20 per cent. for local good causes, as opposed to less than 5 per cent.?

Nick Harvey : Possibly, but not necessarily. The hon. Gentleman divided the revenues into equal amounts for constituencies and said that his constituency had benefited from less than 5 per cent. of the whole. If his constituency has been badly served by the distribution bodies, he and other public authorities should set about those distribution bodies with their cudgels. If the market were completely liberalised, the critical mass of the national lottery would be diminished and smaller proportions of ticket sales would go to charities as a whole. Thus there is no guarantee that the recipients in Christchurch would receive more than they do at present. On balance, it sounds as though the hon. Gentleman's constituency has been rather badly served by the distribution bodies. His energies might be better devoted to that end of the equation and to breaking the critical mass that the national lottery currently involves.

Camelot estimates that adopting the proposal could result in a loss of more than £1.28 billion to good causes. I am not taking its brief and suggesting that that figure is necessarily absolutely correct. I have no doubt that we shall take such matters with a pinch of salt. However, a substantial loss on that front seems possible.

The second report was on side betting. I do not know about the impact of that aspect. Clearly, it will divert some of the money that players currently pump into the lottery. The disadvantage is that none of that money will go to good causes, and not much will go to the Treasury, either.

Mr. Page : Unfortunately, I did not have the stamina to develop the point about side betting. There is probably more clear evidence in that case than in any other of the effect on Camelot. We have the Irish experience to draw on, and we are looking at a considerable reduction of some 20 per cent. The hon. Gentleman may agree that the only way for side betting to continue is for people to have to pay Camelot for a licence to side bet on its numbers.

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Nick Harvey : It is an interesting proposition that that is the only way to guarantee that some of the money will be invested and ultimately go to good causes.

The third recommendation of the Budd report was a universal minimum age of 18 for all gambling. As the hon. Member for Christchurch said, young people are becoming addicted to the purchase of scratch cards. There is no doubt that that is a serious problem. In 1997, a hotline was established for those who suspect retailers of selling tickets to under-age players. The commission has discussed with Camelot how to patrol the matter, and Camelot is committed to 10,000 under-16 tests on retailers in the forthcoming year. Retailers must fill in a refusal register every time they turn away what they suspect to be an under-age player.

Serious issues are involved. We are all aware that the proceeds of the national lottery are waning and diminishing. I do not believe that anyone seriously blames independent retailers for that, as the hon. Member for Christchurch suggests. Whether those diminishing sales would be combated by competition, and whether people would be willing to donate more if they knew which cause their money was going to, are issues that are worth debating. However, I urge the Government to proceed with caution.

Another option is simply to increase the number of terminals. However, we must recognise that that would have serious cost implications, and whether it would pay for itself is a matter of doubt. Camelot must remain commercially viable, and in terms of extra sales it simply would not be worth connecting a huge number of extra terminals if only a small number of people used them. As I said, Camelot ring-fences up to 1,000 outlets in which the terminal allows a small business to serve a community as a shop or other useful commercial premises. That is very much appreciated, especially in constituencies such as mine.

I look forward to hearing the Minister's response. Clearly, not all is entirely well with the operation of the lottery, but Camelot has, I believe, been a successful operator. The licence conditions under which it operates are legitimate matters for us to debate, but I do not believe that some of the criticisms of it have been entirely fair.

11.49 am

Miss Anne McIntosh (Vale of York): I am grateful for the opportunity to wind up for the official Opposition. I am delighted to see the Minister in his place, and it would be most welcome if he would also respond to the points that I made in a previous debate on the Budd review. I shall certainly give him plenty of time to gather his thoughts.

I congratulate my hon. Friend the Member for Christchurch (Mr. Chope) on securing this welcome and timely debate. He has raised a number of very important issues, which I hope the Minister will address. It is also a pleasure to follow my hon. Friend the Member for South-West Hertfordshire (Mr. Page), who made some excellent points. The hon. Member for North Devon (Nick Harvey) might not realise that my married name is Mrs. Harvey. It is probably a good thing that I am speaking today under my maiden name, as that will avoid any confusion between the official Opposition and the rest.

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I should declare an interest in respect of the lottery grant funding—almost £6 million—that the Vale of York has been fortunate to receive to date. The manual that we received this week from Camelot was impressive, and in that regard I am grateful to the previous Conservative Government. The lottery was a great Conservative initiative, and it is pleasing to learn that the hon. Member for North Devon shares the view of the official Opposition that it has been a huge success. It has made a significant contribution to sport, the arts and local initiatives.

A fundamental Conservative principle, which we always followed, was that good causes such as health and education should not be funded by taxpayers' money that they otherwise would not receive. In setting up the lottery, we had two guiding principles: arm's-length operation, free from Government interference; and additionality, whereby any money was additional to Treasury expenditure. It is with regret and disappointment that I record that the Labour Government reversed both those principles in their first term.

The renewal of Camelot's licence, over which the former Secretary of State for Culture, Media and Sport presided, proved shambolic. The 1997 Labour party manifesto—that dreadful document—states:

In January 1999, the former Secretary of State appointed a National Lottery Commission to oversee operation and regulation of the lottery, and to choose the next licence holder. The commissioners took up their posts on 1 April—a noteworthy date—1999. The Government then reversed their pre-election pledge and ruled that the next operator would be allowed to make a profit.

Mr. David Amess (in the Chair): Order. Those responsible for recording our proceedings advise me that we are not making ourselves clearly heard. If hon. Members could speak directly into the microphones, such technical difficulties might be sorted out. The problem has probably been exacerbated by the fact that various hon. Members have had difficulty breathing.

Miss McIntosh : I shall endeavour to be even more robust in my delivery than usual, Mr. Amess, and I hope that the technical difficulties will be dealt with as soon as possible.

The most shambolic of licence procedures was then adopted. The National Lottery Commission announced that neither the new applicants, The People's Lottery, nor Camelot, the then licence holder, would be awarded the next licence. Only the People's Lottery was allowed to proceed, and it had one month in which to improve its bid. Camelot then took the commission to the High Court, and won its case. It was not until 19 December 2000 that Camelot was eventually awarded the licence.

It matters not to me in which direction the Minister cares to look, but he cannot ignore the implication for good causes: that in future, the Government must respond by having a mechanism to protect lottery good

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causes from legal action. He must also recognise that the 5.4 per cent. slide in ticket sales—a reduction to £2.4 billion in the six months to 30 September—has had a knock-on effect. Camelot attributes that to the controversial licence competition and warns of a further decline for the second half of the year, up to 31 March 2002.

Hon. Members have referred to a threat. I would formulate it differently from my hon. Friend the Member for Christchurch, but I believe that the Budd review places an enormous dilemma before the Government. It is not for me, as a member of the official Opposition, to provide the answers. I merely humbly submit to put the questions. How will the Minister resolve the dilemma? In the Vale of York, the projected loss over the initial seven-year licence period alone would be almost £800,000. Projected lottery sales nationally would be £51 billion—a 13 per cent. reduction as a result of the gambling review.

Mr. Chope : Before my hon. Friend accepts hook, line and sinker the quotation from the letter about the Vale of York, will she compare the figure of £6 million, which I think she said good causes there have received from the lottery so far, with total sales in her constituency of more than £50 million? The good causes there have been getting far less than the 20 per cent. minimum that would be required were there a society lottery instead.

Miss McIntosh : My hon. Friend raises a pertinent point, and I accept what he says. However, no matter how frustrating we might find its conclusions, we are looking at independent research commissioned by the Henley centre and PricewaterhouseCoopers, which developed models to predict the impact of the recommendations of the gambling review. I shall say later why I think that there might be further losses in ticket sales.

The independent research brought to our attention this week, in excellent timing for my hon. Friend's debate, suggests that the good causes will lose £2 billion nationally during the seven years. I entirely accept the arguments of my hon. Friends the Members for Christchurch and for South-West Hertfordshire that there are many good recommendations in the Budd report. That was the subject of a separate debate, and we look forward to hearing more on it. However, we must not lose sight of the losses mentioned by many hon. Members in that debate, which could have a huge impact, especially on seaside resorts. They have suffered a huge fall in income from tourism generally this year.

Mr. Chope : Is my hon. Friend completely discounting paragraph 35.9 of the Budd report? It says:

It suggests that there will be no significant effect on good causes overall, just competition among good causes.

Miss McIntosh : That is very interesting, and the Minister must weigh up any disagreement between the conclusions of the Budd report and those that face us today.

Mr. Caborn : The hon. Lady was asked the question.

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Miss McIntosh : The Minister challenges me, and I shall respond to that by using some figures with which I was provided by the Library in preparation for today's debate. The figures make no recognition of any contribution that was the subject of the gambling review. I could almost argue for a different debate, but I would hate to see my hon. Friend ruled out of order. The figures provided by the Library compare national lottery sales with those of leading market brands sold through normal retail stores. National lottery sales, at £4.532 billion, top the table, followed by Coca-Cola with £640 million, closely followed by Instants with £561 million. I share those figures with hon. Members as I welcome Mr. Conway to the Chair.

How will the Government respond to the drop in sales? Will the Minister specifically consider the impact of the new opportunities fund? This is a classic case of the Labour Government raiding the lottery and taking money away for purposes such as sport, the arts and village hall projects. I have heard about several applications that have regrettably been turned down by the community fund because the money is no longer available under the national lottery. Many such bodies fear that there will be even less money in future. The new opportunities fund is being used to distribute money to pay for Ministers' pet projects in health, education and environmental projects. It takes 13 per cent. of lottery money, and that will rise to 33 per cent. once the Millennium Commission has been wound up. One third of all lottery income for good causes will be siphoned off to Labour's pet projects.

The Government must be aware that they are seen to be increasingly prescriptive about how lottery money is distributed. They are dictating strategies and priorities to bodies that are meant to be independent. To take sport as an example, Sport England will be made to ring-fence 20 per cent. of lottery funds for allocation to youth sport, the bulk of which will be spent in schools. That amounts to putting £750 million into school sport over three years. That approach is wrong. Using the lottery to fund health projects means that it works like a regressive tax, for the simple reason that poorer people spend disproportionately more on the lottery than wealthier people. Moreover, lottery money was meant to provide additional funds to the Treasury, not to substitute funds that would otherwise be spent by the Treasury.

I shall conclude in order to give the Minister ample time to respond both to this debate and to the comments that I made in the Budd recommendations debate a short time ago. The debate is timely and I congratulate my hon. Friend the Member for Christchurch on securing it and on introducing it so eloquently. He was ably supported by my hon. Friend the Member for South-West Hertfordshire and gained the recognition of the hon. Member for North Devon regarding the success of the national lottery.

The debate raised several issues to which the Minister must respond as a matter of urgency. First, the loss of ticket sales must be reversed. Last year, the shambolic licensing procedure led to six wasted months, uncertainty, legal action and the resignation of two commissioners. Secondly, the potential loss of lottery money to good causes through the Budd recommendations poses a dilemma. Thirdly, the new opportunities fund substitutes Treasury expenditure

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rather than adding to it, and the Minister must accept that that was never the original intention of the national lottery.

12.4 pm

The Minister for Sport (Mr. Richard Caborn) : I have enjoyed the debate because it has shown the great divisions between Opposition Front Benchers and Back Benchers. It was quite enlightening. I have no doubt that those differences of view about how the lottery should be run will be taken into consideration when we carry out the various reviews.

I thank the hon. Member for Christchurch (Mr. Chope) for allowing us to debate this important subject, as it gives me the opportunity to put one or two things on the record. I had understood that the debate would be about Camelot's licence, not the Budd report or the distributing bodies. That is what I shall respond to, although I acknowledge that there are wider concerns.

The hon. Member for Christchurch cited three major capital projects: the dome, the royal armouries and the national stadium. All of those were set up in terms of the major capital spends while his party was in government; it was not this Administration who set them in train.

Mr. Chope : It is certainly true that the original sum of money for the dome was established under the Conservative Government. However, the money that was put in subsequently—about a 50 per cent. increase—which was then qualified by the auditors as being not good value for money, was put in at the insistence of the Labour Government.

Mr. Caborn : The hon. Gentleman might be able to enlighten the Chamber about the national stadium and what his Government did in 1996, and about the armouries. However, perhaps we should leave that for another debate.

There have been many references to the Budd report, and we are considering all the responses to it. It would be premature for me to second-guess what the conclusions will be. We have had a good debate on that as part of the consultation process. We allowed three months for the consultation and made no comment on the Budd report, or the commission's recommendations to the Government, which we put into the public domain. As the hon. Member for Vale of York (Miss McIntosh) said, we have had discussions here in Westminster Hall, and questions have been asked on the Floor of the House. All of that will be factored in to our conclusions. We have given an undertaking that early in the new year we shall come forward with both our considered reply and a timetable for implementation. I have no doubt that there will be further discussions on the conclusion that we draw.

Many of the comments made today have been about the implementation of the Budd report, yet it will not necessarily be implemented in its entirety. It makes recommendations to the Government, but we are mindful of the fact that the lottery could be affected, as the hon. Lady said.

It is amazing how people become such experts on these issues. I was interested to read Polly Toynbee's article in one of our national newspapers. I had never

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realised that she was such an expert on working men's clubs, but obviously people read up on those issues from time to time, even if they do not experience them. I read her article with interest, as I did the Henley report and other submissions that have been made. There is no doubt that this is a serious issue, and the Government are taking it seriously in responding to the Budd report.

This morning's debate has clearly shown that there are differences in approach to the national lottery, vis-à-vis Budd—even within the Conservative party. I accept that that is quite genuine, and we shall take it into consideration.

Mr. Chope : Does the Minister agree that the debate is not so much between individual members of the Conservative party, but between those Members of Parliament whose constituencies have received far less of the pro rata return from the good causes fund?

Mr. Caborn : If the hon. Gentleman wanted to discuss lottery distribution, he should have made that the subject of the debate. I understood that the subject of the debate was Camelot's licence. Camelot has no responsibility for distribution, which is dealt with by the national distribution bodies. If one wants to criticise distribution, that is fine and justifiable, but it is the not the subject of today's debate.

Mr. Chope : I take the Minister's point, but surely the national distribution bodies are independent of the Government. My concern is that, because of the way in which they operate, they create a disincentive for my constituents to use the lottery.

Mr. Caborn : There is an old saying: one should throw the shovel away when one is in a hole. Whenever the hon. Gentleman wants to introduce a debate on the distribution of national lottery funds, that will be fine and I shall debate it, but it is not the subject of today's debate. The debate is about Camelot's licence.

I give credit to the previous Administration for introducing the national lottery. It was not popular at the time, but since 1994 it has probably become the most successful lottery in the world. Many people have gained from it and nearly three quarters of the population of the United Kingdom participated in it last year. That shows its popularity. I do not think that those people play for good causes—they play to win—but that nevertheless provides a good mechanism for producing the £10.5 billion that has been raised over the past seven years, which is commendable. That income may not be protected, in the strict sense of the word, but we want to ensure that despite modernisation—and regardless of what happens about the Budd recommendations—such income is maintained for good causes. We shall take that point into careful consideration when we review the Budd report.

The success of the lottery to date has not been inevitable or preordained, so credit must be given where it is due. A key point about the lottery is that the operators operate at arm's length from the Government. The hon. Member for Christchurch did not factor in the new role of the National Lottery Commission. The

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commission was created under the National Lottery Act 1998 to take over the functions of the former director general of the National Lottery. Its statutory duties are to ensure that the lottery is run with due propriety and that the interests of players are protected. Subject to those two conditions, the commission also has a duty to maximise the returns to good causes.

Exercising its own independent judgment, the commission awarded the second licence to operate the lottery to Camelot 12 months ago. We all remember the difficulties and I acknowledge, as the hon. Member for Vale of York said, that they undoubtedly did a lot of damage to the lottery. One can see how ticket sales fell off. The procedure was not good and we must review it, but although the damage was considerable, we have come through it. It is true to say that lotteries need to refresh themselves from time to time, and have new innovations and creativity. The debacle that took place during the awarding of the licence damaged the lottery, but I hope that it is now recovering. Many people jumped on the bandwagon of bashing Camelot and the lottery, which was unjustifiable at that time.

The licensing included not just a choice of operator, but the terms and conditions of licence. The new seven-year licence starts at the end of January 2002 when the current interim licence expires. The new licence includes a number of changes, which the commission believes are significant improvements. The most noteworthy change addresses the incentive for Camelot to increase sales to maximise the proceeds for good causes. I am concerned, as is Budd, about young people having access to gambling, and that has been acknowledged through the new licence. I remind hon. Members that Camelot must establish at least 10,000 under-16 tests each year and the commission can increase that number if it can show grounds for doing so. There is a minimum threshold, and a regulation that relates to young people having access to the lottery and scratch cards, and I know that Camelot will take those seriously.

The gambling industry now recognises the problem of under-age and problem gambling. The Budd report recommended that a charitable trust of £3 million be set up and I am pleased that the industry is now responding positively. It has set up the trust, in which the whole industry is participating, and I understand that funds are approaching £1 million. The gambling industry, including Camelot, is being socially responsible and wants to find the cause of under-age and problem gambling generally. The hon. Member for Christchurch referred to under-16s having access to the lottery. Camelot will take that seriously in the new licence and I know that the commission will be watching what it does.

Mr. Chope : What will the sanction be if, as happened between 1997 and 1999, under-age sales of scratch cards increase?

Mr. Caborn : I imagine that the commission would take whatever action it has the power to take. I do not know exactly what that is. If it believes that its power is not strong enough and young people continue to have access to the lottery, doubtless the commission will bring that to the Government's attention. We would then have to consider how to strengthen that power in any subsequent licensing. The concern relates not just to the lottery and Camelot; the Budd report raised a wider

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concern and the industry is responding to that. The discussion will continue and I hope that we shall eradicate the worst excesses to which the hon. Gentleman referred.

If Camelot's after-tax profits exceed those in the principal forecast included in its bid, the excess will be shared evenly with the national lottery distributors fund. Pages 23 and 24 of the commission's annual report for 2000-01 includes a table listing other improvements, which covers issues ranging from advertising to intellectual property to software testing. The important point is that Camelot will have even more incentive than previously to increase sales. However, the licence to run the lottery does not set the terms of the relationship between Camelot and the network of retailers. That is essentially a commercial relationship for Camelot to manage. Approximately 24,750 retailers have an online lottery terminal and around 10,400 sell scratch cards only. Camelot estimated that 94 per cent. of the population live or work within a couple of miles of a lottery outlet. Retailers take about £250 million a year in commission on national lottery sales, which is approximately 5 per cent. of total turnover.

In its bid for the second licence, Camelot set out plans to review its network of retail outlets. As part of that process, it intends to introduce an improvement programme, which will take account of consultation with the commission and its own retail forum. It will introduce a minimum weekly sales target of £1,500 for online ticket retailers. The target is a weekly amount of sales, covering all national lottery games, which each retailer will be expected to meet or exceed. Each outlet's sales will be averaged over 13 weeks to determine whether it is performing under or over the minimum weekly sales target. That will ensure a reasonable spread of sales, levelling any unusually high or low performance.

Retailers performing below the expected level will be placed on a sales improvement programme lasting 24 weeks, during which time they will receive practical advice, assistance and support from Camelot staff. The hon. Member for Christchurch was derisory about that, but he then said that we should help retailers to sell more tickets.

Camelot is being responsible and allowing a fair spread of time in which sales can take place. If they are not sufficient, Camelot will try to help the retailers by sending its experts to assist, and there is nothing wrong with that. That is welcome because it covers issues such as shop layouts, staff training and increasing sales. After an initial period for retailers to implement their improvement plans, Camelot intends to monitor sales on a weekly basis for about 16 weeks. It has made its expectation clear: that sales should achieve the £1,500 a week target over that period, and that it will give notice of termination to retailers who fall short of that. The period of time and the consultation are both reasonable. One hopes that it will be a win-win situation, because if a retail outlet can be improved in terms not only of lottery ticket sales but of activity in the shop, the retailer will be in a better position.

Mr. Page : I thank the Minister for giving way. I agree with everything that he has said, and I understand that Camelot wants greater efficiency and through-put—amen to all that. However, in small villages with limited

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populations, retailers cannot generate sufficient sales to meet Camelot's criteria. If those outlets close, we shall be confronted by the post office argument.

Mr. Caborn : Camelot has said that it will take account of mitigating circumstances, such as those mentioned by the hon. Gentleman. Certain categories of retailers will be excluded from this exercise, and Camelot is committed to ensuring that the isolated communities to which he referred continue to have access to the national lottery. It has made provision to ring-fence up to 1,000 "community outlets", which will not be subject to the general sales target, and it has identified several other special cases.

Camelot has established arrangements under which retailers will have the opportunity to ask an appeals panel to review a decision to terminate their agreement, which means that there is a safety mechanism in the system. That will be an internal company procedure, but Camelot intends to make it fair and transparent. I have described the intended measures, but I must make two points about them. First, these are not matters for the Government to approve or disapprove. Secondly, the measures appear to be consistent with the commission's aim in setting the new licence terms of getting Camelot to focus on sales improvement. The new licence will be the basis for operation of the lottery over the next seven years.

The Government have decided that it is time to reconsider the licensing structure and system, because we want to ensure that when it comes to the third licence there is effective competition. There are several options for change, some of which would involve legislation, but I said at the outset that the lottery has been successful and we want to keep it that way.

Mr. Chope : The Minister has been generous in giving way. He seems to accept that it is reasonable for Camelot to impose a £1,500 minimum for sales. If the objective is to increase sales, Camelot should tell all its retailers that they must increase sales by 10 per cent., rather than expecting small shopkeepers to increase their sales by as much as 50 per cent., which is surely unreasonable.

Mr. Caborn : Ultimately, those are commercial judgments, and the Government do not interfere with them. The hon. Gentleman is being hypocritical: on the one hand, he is arguing that the Government should get out of the lottery; on the other, he is trying to get the Government into it. The Government are not involved and it is a commercial decision. We have imposed conditions on Camelot through the commission, and the system is fair and transparent. If difficulties arise, there are several safety valves in the system that his constituents can use.

The commission oversees the operation, and I hope that Camelot will increase sales because that will benefit everybody. An increase in sales of lottery tickets could mean an increase in activity for individual retailers.

Miss McIntosh : When the Government consider the national lottery review, will they bear in mind that the thrust of proceeds to good causes should be shifted from major national projects to smaller projects, especially those that will have an impact on local communities?

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Mr. Caborn : Although we have been criticised this morning for our actions, the hon. Lady will know that, since we came into power, we have moved significantly from capital to revenue. One of the present difficulties is the major capital investments that were made in the past with lottery money. I am not criticising the Conservative Government; what they did at the beginning was fair, but we have now reviewed the matter and have moved to a position where capital is 49 per cent. and revenue is 51 per cent. We have moved from big projects, such as stadiums, domes and armouries, to local schemes that deal with the needs of the community.

I do not disagree with the hon. Lady. We shall continue to take such action, but such a transition takes time. There has been a significant change from capital to revenue, from large to small. Although the new opportunities fund has been criticised this morning, it takes account of what is happening at the grass roots and is responding to that, as did the coalfields community fund through the lottery.

As for changing the licence, we shall consider what has been said this morning and what will be said in other debates. It is in everyone's interests to ensure that the lottery is successful. We have been through the debacle of the licence, which did neither the lottery nor good causes any good. That can be in no one's interests, and we must get it right next time. We shall consult on such matters; we shall listen to what people say and incorporate those views into our decisions.

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