Memorandum submitted by The People's Lottery
INTRODUCTION
1. The People's Lottery welcomes the opportunity
to contribute to the Culture, Media and Sport Select Committee's
inquiry into the Operation of the National Lottery.
2. The People's Lottery submits this evidence
with the following context in mind. Firstly, the process of selecting
the operator of the National Lottery licence for the period between
2001 and 2008 is still underway and has attracted considerable
comment and attention. Secondly, that The People's Lottery is
a bidder for operating the next licence and has not been involved
in many of the aspects that an existing operator in the UK would
be. Although many members of our consortium have first hand experience
in other jurisdictions The People's Lottery field of expertise
in these matters is covered largely by the work that we have undertaken
in preparation of our bid. Consequently some of the elements that
the Select Committee will be looking at are not matters about
which it would be appropriate for us to comment.
THE PEOPLE'S
LOTTERY
3. The People's Lottery is a consortium
brought together under the vision of creating a fun and inclusive
National Lottery that exists to improve the fabric of UK life
by providing a safe leisure activity whose proceeds would benefit
the community as a whole. The People's Lottery Limited will run
the National Lottery with the single-minded objective of maximising
the funds distributable to good causes, via the National Lottery
Distribution Fund. Operating with propriety and in a socially
responsible manner.
4. Having looked into the nature and experience
of Government protected lotteries across the world it is clear
that such lotteries will produce a significant surplus to their
costs. Hence we believe an operator must be more than just self-financing
but also must be as efficient as possible. This has two elements.
Firstly that in addition to the mandatory remittance of a percentage
of net revenue to the National Lottery Distribution Fund, the
profits generated by the sole private monopoly operator of the
National Lottery should also be applied to Good Causes rather
than taken as super profits by shareholders and/or shareholding
suppliers. And secondly that such a "not for profit"
operator must be at least as cost effective and capable as any
"profit taking" private sector alternative. There is
a weight of consumer research that demonstrates that the "not
for profit" approach not only enhances the reputation of
the Lottery and its operator but also encourages participation
in the lottery. This is why we believe that our proposal will
provide for a greater return to good causes.
5. The People's Lottery is a company limited
by guarantee established solely for the purpose of operating the
National Lottery. No individual owns any shares in the operating
company and therefore no individual has overall control of the
company. There are seven members of the Board of the People's
Lottery. The following six members of the Board will be Non-Executives,
Sir Richard Branson, John Jackson, Don Cruikshank, Lord Blakenham,
Caroline Marland and Henry King. In addition the Chief Executive,
Simon Burridge will also sit on the Board.
On the premise that no one supplier can provide
all the systems needed to run the National Lottery, The People's
Lottery has taken a "best of breed" approach in the
selection of service providers and their products.
6. The People's Lottery system will deliver
an enhanced gaming experience to the player and use flexible systems
to add innovative games ensuring the National Lottery becomes
a growth brand over the duration of the next licence. It will
increase accessibility for players with new distribution channels
and provide terminals that are robust, reliable and multi-functional.
Secure computer transactions with business continuity using reliable
and proven technology with a minimal risk transition from the
current operator.
7. To meet these demanding principles, the
world's leading suppliers of lottery, gaming and IT based systems
and services have been brought together. The key service providers
to The People's Lottery include Automated Wagering International,
Compaq, Energis, Cisco Systems, Microsoft, Wincor Nixdorf, J Walter
Thompson, KPMG Consulting and Serco.
8. Whilst some of those involved in The
People's Lottery were also part of previous consortia that bid
for the section 5 licence in 1994 this is a substantially different
and stronger team.
9. The People's Lottery will ensure that
the National Lottery will be organised, set up and run efficiently,
with integrity, with responsibility, with credibility, with fairness,
with propriety, and above all with flair and imagination. It will
safeguard the interests of every participant while observing the
principles of best employee practice, and corporate governance,
with the principal objective of maximising the net proceeds received
by the National Lottery Distribution Fund.
10. At all times, The People's Lottery will
be committed to evaluating market response, new game concepts,
technical and other advancements with a view to ensuring a flexible
and responsive approach to relevant developments and opportunities.
The People's Lottery Limited is a professional, target-driven
business, which will continually strive for quality, efficiency
and cost minimisation.
SELECTING THE
OPERATOR OF
THE NATIONAL
LOTTERY
11. As the process of adjudication of the
bids is currently ongoing the following observations relate to
that part of the selection of the operator about which it is appropriate
for us to comment. The People's Lottery would, of course, be willing
to provide considered comments on the process as a supplement
to this evidence. In the meantime, there are two particular observations
that we would make.
12. Firstly, there would appear to be some
defects in the drafting of the original legislation that meant
that any potential applicant to run the National Lottery would
not be bidding on a level playing field with the incumbent. These
important provisions include obligations on the incumbent about
providing full and accurate information on the retail network.
They also relate to how some of the assets of the incumbents were
advantageously accounted for and what the NLC owns in the case
of a transfer to a new operator. The NLC considered carefully
the comments from others and ourselves and dealt with these issues
with some considerable skill in so far as the legislation allowed.
Although this meant that they were unable to deal with some matters
they did insist that the new bids would have to include introducing
new terminals rather than, as we had suggested, calculating on
replacement cost values.
13. Nevertheless it was clearly an unsatisfactory
position that such defects may have discouraged potential bidders
and caused some difficulty in creating a fully open and fair contest.
In our view these matters should be corrected and in place for
the next licence application period.
14. Secondly, the Commission announced on
23 August 2000 that neither of the two bidders met the statutory
criteria for the award of the licence. Our examination in the
light of previous precedents has led us to the opinion that our
bid met the statutory criteria at that stage and was submitted
on that basis.
OPERATION OF
THE NATIONAL
LOTTERY
15. The People's Lottery believes that the
National Lottery should be inclusive and that its appeal should
touch every adult in the UK at some time. After all, at some time
or other the vast majority of people feel lucky, or dream of what
they would do if they were to win. The games that the National
Lottery carries under its banner are its products. Nothing can
be more important to the welfare of a successful National Lottery
than the portfolio of its games.
16. The People's Lottery has undertaken
extensive research of both the player base and successful lotteries
throughout the world. Our recommended games are outlined in our
bid document and are designed to deal with the priorities of providing
regular and large jackpots through a greater incidence of single,
double and treble rollovers and increasing substantially the number
of players who become millionaires (with significantly better
odds of becoming so) with a plethora of smaller prizes.
17. The full portfolio of games that is
offered to the public by the National Lottery constitutes its
product. As in all market sectors, the quality of the products
that are being sold is key. No marketing activity, no good cause,
no underlying social responsibility, no use of new technology
or refinement of player access by new or old distribution channels
will sustain the National Lottery over the next licence period,
if its products are not good enough.
IMPACT OF
THE NATIONAL
LOTTERY
18. We have always been conscious that a
successful National Lottery would impact on charitable giving
and on some other elements of consumer expenditure. The largest
changes caused to charities and to patterns of charitable giving
would have taken place at the beginning of the introduction of
the Lottery. We do not consider that a National Lottery that would
be returned to growth and is generating sales at its potential
would cause a similar change to individual expenditure patterns
as that experienced in 1994.
19. Distribution to Good Causes is not a
matter for the operator although where the proceeds of the Lottery
are applied certainly has an impact on the public's view of both
the integrity of the Lottery and the capability of the operator.
It is certainly true that, for example, the controversies associated
with the funds applied to the Royal Opera House, the purchase
of the Churchill Papers and the Dome have had a negative impact.
Similarly the progress of UK Athletics at the Sydney Olympics
has boosted confidence in the use of Lottery funds.
20. We believe that for the successful operation
of a lottery it is important to ensure that those responsible
for distribution take full and proper account of public opinion
and the public mood. We are aware that both distributing bodies
and Government are aware of these issues and have taken many important
steps to deal with these matters.
21. Nevertheless our consumer research indicates
that the public want the funds applied in a way that strengthens
the voluntary sector and does not act as an additional pool to
cover general Government expenditure. We are also aware that the
uneven pattern of distribution of funds across the country causes
concern to many. Additional proposals that would enhance public
confidence in distribution and that would help to inform distribution
bodies on the public mood and its expectations would certainly
be useful.
22. As regards social impact the study "Gambling
Behaviour in Britain" by the National Centre for Social Research
(June 2000) suggests that there is not a significant problem with
the prevalence of excessive play of lottery tickets and scratchcards.
Nevertheless The People's Lottery acknowledges that the accessibility
of the Lottery and its low price entry places a particular responsibility
on the operator and is determined to fulfil its obligations with
a high priority and unrelenting effort. This approach will be
consistently applied across game design, marketing, the retail
arrangements and the provision of information warning of the dangers
of excessive play and where help can be sought.
23. In the case of underage play there are
problems that need more concerted attention especially unlike
in the case of excessive play it is not difficult to detect or
define. The published figures on underage play of the lottery
are very dramatic. TPL is totally committed to ensuring that every
possible effort is made to ensure that distributors do not sell,
wittingly or unwittingly, to someone under 16 and our contracts
with retailers will reflect this. We have a series of additional
proposals to deal with this including doubling retailer visits.
November 2000
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