Examination of Witnesses(Questions 160-179)|
WEDNESDAY 22 MAY 2002
160. Supposing he finds that they are not fit
and proper? What would that do to the running of the Lottery?
I am just asking really whether you have got a fallback scheme
because only half the inquiry has been carried out.
(Mr Harris) My understanding is
161. It is not your understanding because these
papers are going to be provided to somebody else. It will be about
his understanding: whether he thinks in reading the evidence that
these are fit and proper people. Supposing he comes up and finds
that they are not. Do you have a fallback plan?
(Mr Harris) I think ultimately it is for the Commission
to determine whether or not the people are fit and proper but
obviously if Sir John Bourn had views he fed through to us then
we would consider them very seriously. In terms of a fallback
plan, we are giving considerable thought to this. It is an area
where it is very difficult to have straightforward contingency
plans so that if the operator is suddenly removed for reasons
of fitness and propriety one can have a Lottery in place straight
away, but we are currently looking at our own risk management
and the Department's risk management arrangements to make sure
they fit together, and that we have all the contingency plans
we can to deal with those issues.
162. So I would be wrong to read into an earlier
answer you gave, when you said a closure might lead to a significant
increase in sales of ticket, that that was anything to do with
a fallback plan you might have when we get the other half of this
(Mr Harris) I was not referring to a fallback plan
and also, as I hoped I explained earlier, I was talking about
if one took the finishing point of the current Lottery and then
the starting point when it was relaunched. But there would be
a loss of revenue in the period in between, and that would not
be a recoverable loss.
163. Lastly, how long has this obstruction to
the Comptroller & Auditor General gone on? The letter to Alan
Williams in paragraph 3 says that the exchanges between the previous
chairman of the Committee and himself which suggest that this
process of trying to see this information was available began
before the last election, is that right?
(Ms Street) I wonder if my colleague might assist
(Mr Glicksman) The Comptroller & Auditor General
wrote asking for these gateways to be opened in May 1998, which
was about the same time as the meeting that Mr Williams referred
to with the then Secretary of State.
164. So we have now moved on to May 2002 and
only one of the gateways has been opened, although the Permanent
Secretary is optimistic the other three will soon be opened.
(Mr Glicksman) That is correct and, as Ms Street has
said, I think it is regrettable it has taken such a long time.
There were concerns originally about the implications of opening
the gateways for future availability of information to the Lottery
Commission, and it took a while before ministers reached a view
that they would be willing to take the risk of opening the gateways.
165. So that we can be completely clear, you
are saying it was really the Treasury and other departments which
were putting up obstacles that it was not safe to hand this information
over to the Comptroller and Auditor General, not that the Department
was banging at your door saying, "Where is the information?"
(Mr Glicksman) The request for the information came
from the C&AG and the departments that are responsible for
the legislation which needed to be changed were the departments
to which Ms Street referred earlier, those departments responsible
for the Companies Act, the Criminal Justice Act and the Financial
166. So the request began in May 1998 and the
information is yet to be delivered? What date do you think the
information is going to be handed to the Comptroller and Auditor
(Ms Street) I hate to give assurances that sound like
jam tomorrow, but my best view is that by the end of next month
those pathways should be cleared. For the record, I think it is
important to note that this Report does say that the Commission
had a sound basis for its decision to award the licence to Camelot.
I think that is quite important to note. The additional information
will be about how they weighed up those things and the Comptroller
and Auditor General's views will carry enormous weight, but this
Report is clear that the basis for the decision was sound.
167. Sorry, I thoughtand we can ask the
Comptroller and Auditor Generalwhen he said it was sound,
it was sound on the basis of the information he had, and he did
not have this information.
(Ms Street) I accept that entirely.
168. Knowing the Comptroller and Auditor General,
it would be a unique move for him to make judgments about information
he has not seen.
(Ms Street) No, I accept that.
169. So at the end of the day the information
you had that Sir John has not had about GTech was so serious as
to lead you to the conclusion that because they were intimately
involved with Camelot, perhaps Camelot was not capable of running
this lottery as a proper organisation; is that correct?
(Mr Harris) The information on our investigation into
GTech is information that has been available and is summarised
in Appendix 6 of this Report. As I understand it, the information
the Comptroller and Auditor General has not been able to see is
our vetting information about individuals.
Chairman: That is what I mean.
(Mr Harris) Which would certainly include individuals
who worked for GTech which would be relevant to our "fit
and proper" vetting of individuals
170. But I am not quite clear on information
that you got on the vetting of the individuals which is only available
to you which is not available to Sir John whether the information
that you obtained was so serious that that affected your decision.
You are saying it did not?
(Mr Harris) That information did not cause us either
to nearly find GTech not fit and proper or to raise propriety
concerns. The information that caused the Commission to reach
those judgments was information that was not gathered through
gateways but was gathered through an investigation carried out
by the Commission. As far as I am aware, that information was
made available to NAO staff and is reflected in this Report accordingly.
171. If I had been one of the bidders and you
collected information on me under the Criminal Justice Act, there
would have been a nil return. Are there in any of these four areas
nil returns, no information at all collected under these Acts,
or is there information collected under all four Acts?
(Mr Harris) I believe that there would be information
collected under all four Acts because we looked at over 600 individuals.
172. Sure, it is whether there is anything positive.
My information would come back, as it would for all members of
the Committee that there was nothing found under the auspices
of the Criminal Justice Act and therefore there would be nothing
in the file to give to the Comptroller and Auditor General. What
I am asking you is whether under the trawl under these four Acts
there is information that you will be handing over?
(Mr Harris) There will be files, there will be information.
The information did not cause the Commission to take steps on
fitness and propriety but, nonetheless, from my past experience
as an auditor myself, I would still want to see the file and understand
that the nil returns were actually there and that they were nil
and that there were not returns in there that raised serious concerns
that had not been addressed by the Commission.
173. Will the processes of the vetting be covered
in the information that you give Sir John?
(Mr Harris) Yes, as far as I am concerned, as soon
as I am clear that there is no criminal law problem, I will make
information on the processes and the individual files of information
that we hold available to Sir John. He is free and absolutely
should be free to see all the information we are holding in those
174. Can I take you back to page 11 and the
key facts of the National Lottery. The figure at the bottom shows
that the Government has received over £4 billion in Lottery
duty. That is not the end of story, is it? They take eight per
cent on the ticket sales but then there is £10.6 billion
raised for good causes, much of which goes on capital projects
on which the government gets 17Ö% VAT plus all the employment
taxation on the people who work on those capital taxes, and then
there is £16.5 billion in prizes and people go out and buy
things with that, so the Government gets VAT again, and it gets
the duty when people go and buy a crate of champagne to celebrate
their win. Were you under any pressure from the Government to
keep the Lottery going and not have a gap?
(Mr Harris) No, the Government did not put any pressure
on us or seek to influence the way in which the Commission was
carrying out its responsibilities. The Commission itself believed
strongly that in order to satisfy its responsibility to maintain
returns to good causes, that if it could reach a situation properly
and without cutting across or failing to comply fully with its
statutory responsibilities, then it would do all it could to keep
the Lottery running.
175. So when you decided that of the two final
bidders neither bid was compliant, presumably you had a crisis
meeting of some sort to decide how you went forward from there.
Can you talk us through what happened then?
(Mr Harris) When the Commission came to that view,
before it announced that decisionand I think it is referred
to in the Reportthe Commission went and met the Secretary
of State and told the Secretary of State that this was the position
it believed it had reached and therefore this was the action it
was going to take. Subsequent to that meeting, officials from
the Department met some of my staff to talk about what the alternatives
were if it reached the point where the Lottery could not be kept
running. In the event, through twists and turns, that point was
176. So initially bringing you on to page 15,
2.6, 16 parties expressed an interest by September 1999, but you
only received seven letters of intent. Was there any explanation
as to why the other nine did not proceed with the letter of intent?
(Mr Harris) Yes. We met a whole range of parties in
that time period. Some of the people came forward. Very soon after
the Commission was created we put out press statements and encouraged
people to come forward and talk to us if they wished to do so.
We also took steps to contact people who had been involved the
first time around and we met a number of those people, some of
whom said to us for a variety reasons they did not intend to be
part of the second competition but, nonetheless, we met them and
sought their views and understanding, so that better informed
us about what we might do to encourage competition.
177. One subsequently withdraw from the seven,
well two because one was from a parent company and one was from
a subsidiary, so it left you with five. Can you explain in a little
more detail why the other three were rejected?
(Mr Harris) None of them was rejected. We did not
receive bids from the other three. One of the other three, Trigger
7 Lotto, had intended to bid but subsequently wrote to us just
before the due date and said they were unable to complete the
financing of their bid and would not be bidding. We did not hear
from the others.
178. When you got to the stage where you decided
to proceed with negotiating with the People's Lottery only, and
then that was overturned by the Court, one Commissioner, Hilary
Blume, resigned because she could not agree with the decision
to award the licence to Camelot. Why did she do that? What was
her real beef about awarding the contract to Camelot?
(Mr Harris) Primarily, Hilary took a different view
from the other Commissioners. She put out a public announcement
at the time, as it was her right to do. She believed that the
best return for good causes would be produced by the People's
Lottery bid. She placed much more emphasis on the relaunch plans
that the bid had and some of the features of the bid and she thought
that it would rejuvenate the Lottery and that it was a risk worth
179. It does say at the end of paragraph 3.43
on page 25 that she thought "the evaluation process had been
rigorous and she understood why her fellow Commissioners had reached
their decision." So you parted as friends?
(Mr Harris) Yes.