Select Committee on Culture, Media and Sport Minutes of Evidence

Memorandum submitted by Camelot Group plc


  The UK National Lottery is one of the most efficient in the world in terms of returns to the Good Causes. Camelot originally predicted that during the initial seven year licence period it would raise £9 billion. In October 2000, this figure was revised upwards when Camelot announced that it now expects to return £10.5 billion to the Good Causes.

  In April 2000, Camelot published a Social and Ethical Audit. It is one of only a small number of British companies who have undertaken such an audit and is the only lottery operator in the world to take such a step.

  Camelot's approach to developing a retail network has been to ensure the maximum revenue is returned to the Good Causes whilst ensuring that the National Lottery is accessible as possible for the UK population. Currently, 90 per cent of the adult population live within two miles of a National Lottery terminal. The highest levels of player protection must also be ensured.

  Camelot has developed a comprehensive player protection policy which specifically targets; under 16s, low income groups and those with addictive tendencies. The UK National Lottery is ranked at 30th in the world in terms of per capita spend, which we believe demonstrates how effective our player protection measures are.

  Since 1995 Camelot has given £23.8 million in community investment. Through this investment programme, the Employee Participation scheme and the Camelot Foundation, Camelot is one of the largest corporate donors in the country.

  The development of a partnership between Camelot and the Post Office has led to a joint bidding process for the next seven year licence. The Post Office will invest around £20 million to acquire a 20 per cent shareholding in Camelot—creating a strong public/private partnership.

  Camelot is proud of what it has achieved to date and is committed to the future development and success of the National Lottery.


  Camelot as operator of the National Lottery welcomes the opportunity to respond to the Select Committee inquiry.

  1.1.  Camelot currently has four shareholders: ICL, Cadbury Schweppes, De la Rue and Racal Electronics Plc. If Camelot successfully retains the licence to run the National Lottery, the Post Office will become an additional shareholder.

  1.2.  Camelot originally projected that the National Lottery would raise £9 billion for the Good Causes over the seven year licence period. In October 2000, this figure was revised for the second time as a result of a 4 per cent increase in sales figures based on a comparison between the first six months (April to September) of financial years 1999-2000 and 2000-2001. Camelot now believes that the first seven years of the National Lottery will produce £10.5 billion for the Good Causes.

  1.3.  The National Lottery has become a national institution with 99 per cent of the adult population recognising the crossed finger logo and 94 per cent of the adult population having played the National Lottery at a double rollover. Camelot's research shows that 65 per cent of the adult population still play regularly ensuring average weekly ticket sales are between £90 and £95 million per week. In fact, more people buy a National Lottery product than the combined purchases of Coca Cola and Walkers Crisps.

  1.4.  The development of the National Lottery from the online game and scratchcards has included the launch of the world's second most popular "small lotto" game. Thunderball®, and Big Draw 2000®.

  1.5  In recent research by independent lottery expert, Terri La Fleur, Camelot retained its position as the "world's best" across a range of nine efficiency measures, for the fifth consecutive year. This research also shows that Camelot is again amongst the world's top two operators in terms of efficiency and returns to Government and Good Causes.

  1.5.1.  Camelot was also ranked first in the world by Ernst & Young's Lottery Performance Survey for services to players and retailers, and for security and for technology.

  1.5.2.  Since July 1996, Camelot has hosted 63 visits (a total of 430 visitors) from overseas lottery operators, government officials and retailers. All these groups have been keen to learn from the systems that Camelot has set up, as a benchmark of best practice.

  1.6.  As a young, developing company Camelot has also proved itself to be an organisation which is responsive to change by addressing concerns that have been raised during the licence period to date. The company has already announced that Executive Directors' remuneration packages will be reduced by one third and special bonuses will be abolished. Also, Camelot plans to reduce profit levels to half a penny in the pound.

  1.7.  A key development since the previous inquiry has been that Camelot is the first lottery operator in the world to develop and implement a Social and Ethical audit. Camelot's Social Report was awarded "stage four"—advanced, by its auditors New Economics Ltd. There are five levels of achievement for Social Reporting. To date no UK company has achieved "level five". Other companies which have attained "level four" include The Body Shop and The Co-op Bank.

  The commitment to the development of a social responsibility policy has been at the forefront of our activity. We see this commitment not only as the underpinning for the National Lottery but as a valued requirement for all businesses.

  1.8.  The company aims to develop its internal procedures as well as the games on offer. As a result of continuing efforts to develop the business Camelot received the Investors in People award for the quality of its training, employee development and communications systems in July 1999. In order to ensure that the National Lottery is run in a socially responsible way, Camelot has developed policies in all employee areas and has worked to build good and continuously improving communications throughout the organisation most notably through the Staff Consultative Forum (SCF). Camelot has also recognised the need to recruit and retain a diversity of skilled people (Camelot's 800 employees have accumulated around 3,000 years of lottery experience).

  1.8.1  In addition, the UK Lottery has been the first lottery in the world, and one of only 10 companies in the UK, to achieve both the security standard, BS7799 and quality accreditation ISO9001.

  1.9.  Camelot is committed to offering players the highest level of service and employs a number of measures in order to offer players the highest level of protection. These measures include;

    —  In the event of an error, tickets can be returned within 120 minutes of purchase.

    —  The retailer and Camelot will not reveal the identity of any prizewinner unless the winner has had the implication explained and has signed a consent form in the presence of a witness.

    —  All winners of prizes over £10,000 will be provided, free of charge, with information giving basic advice on a range of relevant financial and legal matters.

    —  Retailers are trained to deal with any enquiries or complaints.

    —  The National Lottery "Player Code of Practice" has been designed to help safeguard the interests of players. A copy is available at all National Lottery outlets, and also from the Lottery Line.

    —  There is a commitment to pay 90 per cent of postal claims within five days. In 1999, Camelot paid 98.7 per cent within that period thereby exceeding the original target.

  1.10.  Camelot is constantly looking to the future development and improvement of the National Lottery. In order to build on the current success against a culture of social responsibility, Camelot aims to:

    —  Offer players a greater choice of games and methods of play. For example via the Internet, mobile telephones and interactive TV.

    —  Introduce 1,000 "community retailers" to support rural and inner city communities.


  2.1.  The structure of the UK National Lottery—which involves departmental policy responsibility, an independent regulator, the distributing bodies and the operator—is one that is widely recognised to be effective and efficient.

  2.1.1.  We believe that it is a model that has delivered excellent results to all those who rely on the lottery. The method of selection of operator, if properly conducted, is similarly one that promises to deliver optimal revenues for good causes while protecting the participants and the integrity of the lottery.

  2.2.  The process for granting the first lottery licence in 1993 was one that was widely recognised as robust and successful, a view that was endorsed by the National Audit Office[1]. Until the current process has been concluded it would be premature to make a final judgement, but to date our experience of it has not been good.

  2.3.  In accordance with our own values, we believe that it is essential that the processes by which any bids are evaluated are open and transparent.

  2.4.  The Commission drew the first selection process for the second section 5 licence to an unsatisfactory end. The NLC did not give Camelot the opportunity to address concerns, which were later used to disqualify us from the competition. This conspicuous unfairness during the first process was recognised by His Honour Mr Justice Richards in his judgement of 21 September 2000. He found that the NLC's decision to negotiate exclusively with the other bidder amounted to an abuse of power. Thus vindicating Camelot's decision to seek judicial review. The terms of the judgement severely damaged confidence in the ability of the NLC to act fairly and competently.

  2.4.1.  The subsequent resignation of the Chair of the NLC, and appointment of Lord Burns has gone some considerable way to restoring confidence amongst our players, retailers and staff in the process. Camelot is committed to participating in the new process, and resolving these issues in a way that best protects the integrity of the lottery, withstands public scrutiny, and assures the continued smooth operation of this popular institution upon which so many rely.

  A chronology of the selection process is attached as an Appendix.

  2.4.2.  Some lessons can already be learned. At the very least we think that recent events underline the need for the highest quality lottery expertise, business insight, and statistical and economic analysis (and of course, legal advice), to be afforded to those attempting to make the selection of the operator. This is a complex analysis where critical judgements of risk, and competence and corporate social responsibility need to be made, across a wide range of functions on a massive scale.

  2.4.3.  Furthermore the Lottery Commissioners need to demonstrate, to the satisfaction of all those with an interest in the success of the lottery, the highest standards of impartiality, transparency, and accountability, as well as competence in assessing this complex analysis. We hope that the evaluation will be made public in order to allay any fears of unfairness, and allow bidders and players alike to be reassured that the demands in the ITA have been properly taken into account. The ITA sought not just maximised revenues, but credibility of delivery, player protection, and social responsibility for bidders.

  2.5.  The integrity of all aspects of the National Lottery is a sine qua non of its success. There is a very clear need for the selection process to command the confidence of the public at large, players and retailers. This is not an area where mistakes can easily be rectified and damage undone, we therefore believe that all possible mechanics be used to ensure a selection that is rigorous, unchallengeable, and fair. To that end, we believe that it would be beneficial for the National Lottery Commission to evaluate its own processes against the recommendations of the Office of Government Commerce (OGC) and the National Audit Office (NAO) before it makes its selection. The Commission should also seek to meet the highest standards for regulators as set out by the Better Regulation Task Force.

  2.6.  The implications of the selection of the operator are as widespread as the impact of the National Lottery itself. A faulty decision will affect the community at large; tens of thousands of good causes, thousands of retailers, and millions of players (as well as the hundreds of staff and suppliers involved in the operation itself). The risks associated with handover are significant, especially on the unprecedented scale of the UK. A decision to change the operator is not one that can be easily undone. Camelot's sole purpose is the operation of the National Lottery. Were there to be any malfunction in the operation of the new operator Camelot could not be recalled. International experience suggests the lottery would take many many years to recover.

  2.7.  Generating revenue for good causes, is the final output of the lottery which is one of the principal criteria for evaluation. The inputs, however, are broad and complex. Before any evaluation of NLDF return can be done, a rigorous analysis of propriety and competence is required that covers retailers, players technology, marketing, game design, business plans, structures and finance, as well as regulatory issues. The task facing a new licence holder is immense; the Commission must evaluate the operators ability to:

    —  process the applications, vetting, contracts and banking arrangements with 35,000 retailers, evaluating their sites for equipment, signage and communications, whilst scheduling and providing training to 100,000 retailer staff in several languages;

    —  Establish and manage a call centre retailer helpline that would be capable of dealing with hundreds of thousands of calls even before launch;

    —  Install 35,000 completely new terminals linked to a new communications network that will have to be powered up overnight; terminals will have had to be supplied, tested, integrated with software, shipped, stored, deployed, and where necessary fixed. Over the course of a year terminals will need to be installed at the rate of around 100 every day;

    —  Establish a call centre for players that ensures fast routing of calls; staffed by vetted and trained operators, backed up by robust contingency sites and plans;

    —  All consumables—playslips, ticket paper, printer ribbons etc, will need to be produced, secured, quality assured, and finally distributed in only the days before launch;

    —  Main lottery systems will need to be system function proved, whilst retailers will need to be cross-trained on the new interfaces. Such systems must be fully synchronised with back-up, and secondary systems at all times;

    —  The communications network will require installation of new cabling and circuits in nearly all retail outlets, followed by individual network testing at both ends; (fault resolution is particularly difficult when using a public network);

    —  The systems will require terminal broadcast capability, and the capacity to respond to download requests without compromising security, or the performance of public networks;

    —  Design, produce, test and secure licences for multiple Instants games for immediate availability in shops on day one of the new licence;

    —  Establish a secure bonded warehouse and distribution system capable of receiving and shipping millions of packages;

    —  Educate players in any changes to the main games without any loss of sales in the run up to their launch;

    —  Provide quality assurance across 1,500 separate business processes and procedures that ensure reporting, tracking, integration, testing, and fault correction, including ISO9001 and BS7799;

    —  Recruit, vet, and train hundreds of skilled staff with the necessary competencies, culture, regulatory obligations, and corporate behaviour to maintain the integrity of the lottery; and

    —  Establish a corporate structure.


  3.1  The retail estate of 35,000 outlets (there is a licence commitment to have 24,300 Online Terminals and 10,800 Game Validation Terminals (Instants only)), has been a key element in the success of the National Lottery with a terminal located within two miles of 90 per cent of the adult population, and in every local authority district. Camelot has received 107,290 applications for terminals from retailers between the launch of the National Lottery and May 1999.

  3.1.1.  The retail network is designed to meet regulatory requirements to protect participants and then to ensure maximum returns to the Good Causes whilst ensuring that the National Lottery is as accessible as possible for the UK population.

  3.1.2.  During the initial seven-year licence, Camelot's retail strategy has been to support a cross section of retailers, two thirds of which are from the independent sector. National Lottery retailers earn 5 per cent commission on lottery sales plus 1 per cent commission on prizes paid out above £10 and below £200. This can provide a significant boost to the income of an independent retailer in terms of direct return in commission and indirect return in terms of increased footfall.

  3.1.3.  According to a survey commissioned by Camelot and carried out by Business and Market Research, 85 per cent of the 1,000 lottery retailers questioned say that Camelot is one of their top three suppliers. More than 50 per cent say that Camelot is their top supplier. In addition, 44 per cent of 103 independent retailers with lottery terminals want Camelot to retain the licence according to a survey carried out by The Grocer.[2]

  3.1.4.  Camelot support National Lottery retailers in the day to day operation of their terminals via the Retailer Hotline. This is a telephone line with up to 120 personnel answering retailer queries. On average it deals with between 19-20,000 calls each week.

  3.1.5.  The Lottery has contributed to independent sector retail economies, particularly in inner city and rural areas, with a National Lottery independent retailer receiving an average of £8,187 in annual commission. The National Lottery is often cited as a key factor in the survival of small independent retailers.

  3.1.6.  The demand for potential outlets for the National Lottery still outstrips the level of allocation by three to one. There is therefore careful consideration of potential outlets through a unique geo-demographic retail selection strategy. This policy has been successful as a result of the transparency with which it has been implemented.

  3.2.  Of the many possible methods of sale for lottery tickets we have chosen a retail online network. This has proved to be a successful medium due to retailer training (30,000 retailers were trained within 10 weeks at launch), retailer agreements and reliable systems. In 1999, the National Lottery network was available 99.84 per cent of the required opening hours exceeding the NLC requirement which is 99.5 per cent.

  3.2.3.  The National Lottery network has not only met performance standards set by our regulator, but has exceeded every standard. Our players therefore can continue to have confidence in the integrity of the lottery computer systems and the overall operation of the National Lottery.

  3.3  Since the launch of the National Lottery Camelot has provided a subscription service to players, allowing those with a UK address and a sterling bank account, to play from home. This service is intended for the particular, but not exclusive use of disabled people and those in isolated rural areas.

  3.3.1.  In addition, Camelot has advertised widely "advance play", particularly over the main holiday season, facilitating advance play of up to eight weeks.

  3.4.  We have looked at other methods of selling. However, this is an area which is quite properly, highly regulated. For example lottery tickets cannot be sold on the street or door to door or by means of an unattended automated machine as is the case in many overseas lotteries. Camelot has looked at developing new methods, for example the sales of scratchcards through, Instant Vending Machines. Camelot remains however, committed to maintaining a balance between increasing sales, being a socially responsible operator and meeting the regulatory requirements imposed by the NLC. It is important that sales growth is twinned with the need to operate with integrity, ensuring that there is sure and steady growth.

  3.5.  Camelot is committed to the use of new technology in order to develop the future of the National Lottery. It must only however, be used creatively, securely and responsibly. The transition to the use of new technologies will be designed to minimise any risk and continue to protect players whilst maximising new opportunities.

  3.5.1.  The introduction of new technologies will enable Camelot to offer players more games, more choice (in terms of method of play) and more convenience. Any developments will facilitate a more efficient, reliable and cost effective service. Camelot will be working with a number of new technology partners and suppliers on the introduction and development of new technologies. However, we remain committed to developing the National Lottery in conjunction with our retailers.


  The National Lottery comprises a portfolio of different products which offer differing playing experiences and different prize structures, thereby appealing to different players.

  4.1.  Throughout the current licence period there is a commitment to returning to players 50 per cent of sales in prizes calculated as an average over the course of the seven year licence period. The full breakdown of each lottery pound for the seven year licence period is 50 per cent in prize payout, 28 per cent to Good Causes, 13 per cent to the Government in lottery duty and other taxes, 5 per cent to retailers, 4 per cent to the operator of which just less than 1 per cent is profit.

  4.1.2.  The actual amount that is returned in prizes each year varies depending on sales volume and the mix of sales between the different types of games. There is however, continuing pressure to increase the level of prize payout, as this proves popular amongst players.

  4.2.  The National Lottery Game currently operates on the 6/49 matrix, which is used by five out of six top lotteries in the world. Camelot is proposing to keep the existing matrix as extensive research has shown that 60 per cent of players prefer the 6/49 matrix, as opposed to 7 per cent who prefer the 6/53 matrix. International analysis has shown that most lotteries that change their matrices do so when sales are declining. In the case of The California State Lottery this proved to be disastrous.

  4.3.  In terms of prize levels, the size of the prize pool for each game is set to optimise sales and revenues to the Good Causes. Sales are highly sensitive to prize payout levels. The prize structure was developed after comprehensive research into overseas lottery markets. Any modification of the current proportions could result in lower revenues.

  4.4.  In the first Select Committee inquiry there was some focus on jackpot levels. Over the last five years, the average winning ticket has been £2,033,784 per individual ticket and the average individual win has been £607,284.

  4.4.1.  Research has shown that controlling or capping of jackpot levels has a detrimental effect on sales. The NLC has recently announced that they have reviewed their policy on jackpots: rather than a uniform policy, each game will be judged individually in terms of jackpot levels and number of rollovers.

  4.4.2.  The behaviour of players in a rollover indicates that the increasing scale of the jackpot motivates them. For example, rollovers on Saturdays generate an average ticket sale uplift of 11 per cent.

  4.4.3.  The introduction of Thunderball®, went some way to address concerns about high jackpot levels. Thunderball® was launched in response to research, which showed that while players like the large jackpot lottery game they also want to play a game that offers a greater chance of winning smaller prizes. Thunderball® is a National Lottery game, which offers people the opportunity to play for a different range of prizes. The top prize does not exceed £250,000 and there are no rollovers or rolldowns. Since the introduction of the Thunderball® game in 1998, sales have reached £330 million.


  5.1.  The success of the National Lottery depends upon the integrity of the National Lottery Commission. Camelot is fully supportive of the need for regulation. It is a credit to such regulation that the National Lottery has been so successful over its initial years.

  5.2.  Camelot recognises the need to ensure a managed portfolio of lottery products in order to maximise net proceeds whilst protecting potentially vulnerable players. Camelot works closely with the NLC (as it did with its predecessor OFLOT) to ensure that a strategic approach to the development of the National Lottery is followed.

  5.2.1.  To that end, Camelot has developed a "Game Design Protocol" which it believes to be a world first. This compares the responses and playing behaviours and attitudes of the general population across comparative vulnerable groups. Currently we are developing a benchmark of risk based upon a range of products available within the whole gambling market. In future we will benchmark any proposed lottery games from the viewpoint of the risk to the vulnerable.

  5.2.2.  Every aspect of operation from the licence for each game to answering telephone calls in an agreed number of rings, is tightly regulated and monitored by the NLC.

  5.3.  In some circumstances we have faced delays in the awards of section six licences. Such delays can potentially lead to problems in the seamless introduction of new games, interfering with lead times that can have a detrimental effect on returns to the Good Causes. During the current licence period, the sales of Instants tickets have been affected as a result of delays in granting licences for these games.

  5.4.  We would further propose that there is a need to further the remit of the Commission to include the protection and promotion of the National Lottery.

  5.5.  Although we consider that the National Lottery is highly regulated, we believe that regulation across the gaming industry should be proportionate to the element of risk it places on players and society as a whole.


  6.1.  As operator of the National Lottery, Camelot has an extensive range of activities to minimise sales to the under 16s. These include:

    —  The establishment of a "Project 16" cross-functional company task force to develop strategies to tackle all aspects of under age play.

    —  Ongoing retailer awareness and training. Awareness raising measures include: terminal messages sent from the host computer to the retail outlets; Jackpot magazine, a specially designed communication magazine for retailers; and the Best Lottery Practice programme, an individual retailer Handbook with a section on under 16 issues, posters, a Certificate of Commitment signed by the retailer and Camelot, as well as various point of sale stickers.

    —  Specific Retailer Vigilance Campaigns to raise awareness and focus attention of retailers, media and general public on under age sales issues. The campaigns have introduced new point of sale material together with a combined record of training of staff and a refusal register. Retailer visits from the 300 strong sales force and completely random inspections of retailers by members of the Security departments (between April 1999 and March 2000, Camelot made 5,000 retailer visits). If a retailer is found to have sold to anyone under 16, the retailer agreement is terminated.

    —  Since the launch of the National Lottery, 91 Lottery terminals have been removed from retailers for selling tickets to those under age or failing to rigorously implement the reasonable safeguards proposed by Camelot. In total, 132 terminals have been removed.

    —  Raising awareness amongst young people of the risks of early gambling, encouraging them to play responsibly only when old enough to do so.

    —  Endorsement and financial support of credible proof of age cards eg CitizenCard, Validate UK and local Trading Standards cards.

    —  A telephone hotline (0870 1600016) was launched in January 1997 to encourage the public to report retailers they believe have sold tickets to children. All calls are fully investigated by Camelot's security team.

    —  Compliance with strict advertising codes of practice.

    —  Camelot has been involved in consultation with leading gambling experts, pressure groups, family, youth and parenting organisations, in respect of strategy on underage sales.

    —  A series of joint test purchase operations with Trading Standards departments around the country have been conducted. In 1999 Camelot worked on 20 test purchase operations with local authorities (19 different authorities). A total of 369 test purchases took place resulting in 15 sales.

    —  Contact by various means with around 200 Trading Standards departments to persuade and encourage the undertaking of more test purchase operations.

  6.2.  As with any process, if there is not an effective enforcement regime, the effect of any legislation is diminished. There is a lack of clarity in terms of who has ultimate responsibility for enforcement in respect of sale of lottery tickets to those under 16. We have sought to address these problems through partnerships with enforcement bodies. For example, joint initiatives with some Local Authority Trading Standards departments (Since 1998, 37 Local Authorities have undertaken test purchase operations) have taken place. It should be recognised that due to economic restrictions and the lack of statutory responsibility, there is a gap in the enforcement of the testing measures outlined above.

  6.3.  The resources of Trading Standards departments are often such that an operation to combat underage lottery sales cannot be a priority for many of them. Camelot has however, introduced a test purchase scheme—Operation Child—to ensure that retailers have in place all reasonable safeguards and training necessary to minimise under age sales.

  6.3.1.  Since Camelot cannot lawfully carry out test purchases it introduced Operation Child, a scheme using young persons over 16 who appear to be under 16 (and who typically appear to be 14 or 15). Since April 1999, 7,503 visits have taken place.

  6.3.2.  Second year results for Operation Child, since April 2000, show that only 11 per cent of retailers sold on the first visit—down from 38.32 per cent in June 1999 (the time of the most recent NLC survey).

  6.3.3.  The use of test purchasing as part of Operation Child has been very effective and has generally been well received by retailers. Camelot has therefore been keen to address the issue of the different legal system in Scotland, which effectively prevents test purchases.

  6.4.  Camelot also recognises that the retailers themselves need to take on responsibility to protect individuals from underage play. In order to assist retailers, Camelot not only support proof of age card schemes such as Citizen Card, but has also introduced retailer training programmes such as Best Lottery Practice.

  6.4.1.  This scheme recognises those retailers who have operated to the standards set by Camelot across a number of areas including consumer protection. Retailers are encouraged to maintain high standards in terms of the services they offer to the player and are recognised for their efforts. Our strategy and actions are designed to support the retailer and minimise the incidents of underage purchase of lottery tickets.

  6.5  In recent years, there has been an increase in the number of adults who buy tickets for children. This is obviously, an area where effective control is extremely difficult no matter what age restriction is in place. An NLC survey showed that purchases made by adults for children increased from 6.7 per cent (1997) to 10.5 per cent (1999). Camelot had already identified this as a problem during its work on its social and ethical audit and had started discussions with parent education groups (from December 1999) to see what strategies could be adopted to tackle this issue.


  7.1.  It is important to us and our stakeholders that Camelot is a socially responsible operator. As a result, two years ago Camelot made a public commitment to undertake an independent Social and Ethical Audit (the first Social Report was published in April 2000) as part of its drive to become the world's most socially responsible lottery operator as well as the most efficient. We believe that along with a small group of companies we are setting a standard by which all business can be run transparently and with integrity.

  7.1.1.  The aim of the audit was to measure the company's broader performance and the expectations of its key stakeholders (including players, NLC, Good Causes, employees, retailers) This undertaking triggered a close and critical examination of all Camelot's business processes and relationships as overseen by external auditors New Economics Limited and an independent Advisory Panel.

  7.2.  Camelot has risen to the challenge of marketing in a socially responsible way. There is strict regulation with regards to advertising and promotion for example through restrictions placed on when advertising can be broadcast and all publicity material must clearly show that play is for over 16's. Camelot must also prove that it is not targeting low income groups or those with addictive tendencies. A recent Gambling Prevalence study[3] showed that half the population plays the lottery each week.

  7.3.  Within the wider context of the promotion of the National Lottery it would be beneficial for joint responsibility for promotion from all the stakeholder groups for example, the Commission, the Operator, Broadcaster and Retailers. At present there is no mechanism for this and it is dependent upon the good will of the partners involved. Such a mechanism will also initiate greater consistency with regards to the overall promotion of the National Lottery.

  7.4.  Camelot believes it is important that the public and players are made aware of those projects and communities which have benefited from the National Lottery. This would be facilitated by the uniform use of National Lottery logos by the distributing bodies.


  8.1.  A number of independent reports have been published since the introduction of the National Lottery providing a mixed view of the impact of the lottery on the voluntary sector. However, the Charities Aid Foundation (CAF) publication "Dimensions of the Voluntary Sector" (June 1998), provided some positive indicators:

  8.1.1.  CAF's top 500 fundraising charities had an 11 per cent real increase in income and an 8 per cent increase in voluntary income in 1996-1997.

  8.1.2.  Funds raised by charities directly from the public—particularly through trading and planned giving—are growing strongly. Trading income increased by 55 per cent and now represents 13 per cent of charities' income compared with 7 per cent last year.

  8.1.3.  According to a survey by Lottery Monitor[4], the advent of National Lottery Instants has seen a proliferation of competing products in the scratchcard market. Some, such as UK Charity Lotteries (owned and operated entirely by three charities)—which has merged with Scratch `n' Win, and Littlewoods typically donate around 20 per cent of their sales to charities compared to 28 per cent of the National Lottery Instants. A number of charities relying on income from their own lotteries are seeing increases in scratchcard sales following the promotion of National Lottery Instants.

  8.2.  In addition Camelot as operator has donated £11 million to a charitable Foundation, the Camelot Foundation. The Foundation has full independence. Its aim is to support organisations, which help disabled and disadvantaged people play a fuller role in the workplace and in the community. The Foundation has three grant making programmes: Community Support, Charitable Projects and the Employee Participation Programme.

  8.3.  Camelot has a very active community affairs function, which is an integral aspect of the wider approach to social responsibility. Activity takes place throughout the company with a Director of Social Responsibility and Player and Retailer Services in charge of policy development and reporting. Since it was set up Camelot has demonstrated a serious commitment to investing in the community both through the Company's own flagship projects (between January and December 1999, Camelot donated 20.22 per cent in pre-tax profits in cash and in kind) to combat disadvantage and in setting up the independent Camelot Foundation

  8.3.1.  According to the ProbusBNW CCI (Corporate Community Investment) Index 2000[5], Camelot shows current best practice (Band 1) in three areas of Corporate Community Investment (CCI), none of the other 11 companies, which were assessed, achieved this level across the same number of categories.

  8.3.2.  Camelot is a member of Business in the Community, the Per Cent Club, the Corporate Responsibility Group and the London Benchmarking Group (set up to develop a model for measuring and benchmarking corporate community investment in terms of management and quality). In 1999 we developed a reporting database to record Company activity based on the London Benchmarking Group model of charitable gifts, community investment and commercial initiatives in the community.

  8.3.3.  Since 1995 Camelot has given £23.8 million to community investment. It is one of the largest corporate donors in the country as a percentage of pre-tax profit. We offer our employees half a day per month to volunteer to work for charities of their choice through our Employee Participation programme. Initially we concentrated activity on fundraising with any money raised matched funded through the Camelot Foundation—where the activity met the funding criteria of the Foundation.

  8.3.4.  We are proud that since 1997 employees have raised £1.8 million, including matched funding—an average of £2,000 per employee. Camelot has encouraged staff to become involved in community issues in order to develop some understanding of those organisations and individuals, which benefit from the money raised by the National Lottery.


  9.1.  Camelot has made a submission to the Gambling Review, instigated by the Home Office. In the context of the review Camelot sought to illustrate that the National Lottery has been affected by a number of deregulatory measures within the gaming industry in recent years. Such deregulatory measures have increased competition in a market already made more competitive by technological change.

  9.2.  Conversely, the National Lottery has also made gambling products much more widely accessible than previously, challenging perceptions of gambling and relaxing attitudes towards softer forms of gambling. It does so, however, within an increasingly competitive industry where comparisons illustrate inconsistencies resulting from, the inability of Gaming legislation to recognise new industries and technologies within current societal values. For example, the charts below show the industry duty levels in terms of percentage breakdown and percentage return to the Exchequer.

  9.3.  Contrary to public perception, Camelot pays a higher rate of effective tax than any other operator in the gaming market. This is because it returns 40 per cent of weekly sales to the nation in tax and for Good Causes (12 per cent Lottery Duty, 28 per cent Good Causes), making it the most efficient lottery operator in the world.

  9.3.1.  The effective tax rate on the lottery (duty plus Good Causes on stake less winnings) is 79 per cent. This is very much higher than the commonly quoted "headline" duty rate of 12 per cent and much higher than any other sector within the gaming industry.

  9.3.2.  The National Lottery has, to date, raised over £9 billion for the Good Causes (it is estimated that Camelot will raise £10.5 for Good Causes over the seven year licence period) and paid over £3.3 billion to the Government in lottery duty. Additionally, Camelot has also incurred non-recoverable VAT of £122 million.

  9.3.3.  The UK gaming market is worth a total of £40 billion a year. The National Lottery's share is about 13 per cent but it contributes around 58 per cent of all the money raised by the gaming industry for the Government in tax and for Good Causes. The National Lottery competes with the pools, bingo, bookmakers and slot machines—the latter having around twice the turnover of the National Lottery.

  9.3.4.  It is Camelot's opinion that duty levels should be maintained at the current level of 12 per cent for the National Lottery. Whilst we appreciate, and indeed are subject to, the challenge of competition from offshore organisations, a change in duty levels across the rest of the industry may result in a diversion of consumer spending to lower duty sections of the industry. In effect, reducing revenue to the Treasury, which amounts to £3.5 billion from the National Lottery.

  9.3.5.  Lottery duty was set at 12 per cent of turnover with the express intention of arriving at compensatory revenue for lost VAT receipts. The most recent Appropriation Accounts however, note that "The National Lottery is thought to be broadly neutral in terms of overall tax revenues."


  10.1  As an operator charged with raising National Lottery funds, it would not be appropriate for Camelot to make any comment regarding the distribution of those funds.

  10.1.2.  However, it may be worth noting that in player research, tracking data has shown that when players are asked where they would like lottery funds to be allocated, the health service and education projects are most favourably mentioned.

1   "Evaluating Applications to Run The National Lottery"-National Audit Office, Session 1994-95 (HC 569). Back

2   The Grocer, 30 September 2000. Back

3   Gambling Prevalence Study by Gamcare-June 2000. Back

4   Impact-a report on the effect on national life of the first five years of the National Lottery, October 1999, Lottery Monitor. Back

5   ProbusBNW CCI Index 2000-Corporate Community Investment benchmarking report. Back

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