Memorandum submitted by Camelot Group
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
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 Camelotcreating
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
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
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
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. THE SELECTION
2.1. The structure of the UK National Lotterywhich
involves departmental policy responsibility, an independent regulator,
the distributing bodies and the operatoris 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
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
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
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
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
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
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;
ticket paper, printer ribbons etc, will need to be produced, secured,
quality assured, and finally distributed in only the days before
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
The systems will require terminal
broadcast capability, and the capacity to respond to download
requests without compromising security, or the performance of
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
Educate players in any changes to
the main games without any loss of sales in the run up to their
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. METHODS OF
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
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
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.
4. THE STRUCTURE
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. THE ROLE
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. THE ENFORCEMENT
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
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
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
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 schemeOperation Childto
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
6.3.2. Second year results for Operation
Child, since April 2000, show that only 11 per cent of retailers
sold on the first visitdown 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
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
7. THE PROMOTION
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
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
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
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
8. THE IMPACT
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 publicparticularly through trading and planned
givingare 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
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
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,
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
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 Foundationwhere
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 fundingan
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. THE IMPACT
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 machinesthe 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. THE OPERATION
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
1 "Evaluating Applications to Run The National
Lottery"-National Audit Office, Session 1994-95 (HC 569). Back
The Grocer, 30 September 2000. Back
Gambling Prevalence Study by Gamcare-June 2000. Back
Impact-a report on the effect on national life of the first five
years of the National Lottery, October 1999, Lottery Monitor. Back
ProbusBNW CCI Index 2000-Corporate Community Investment benchmarking