Memorandum submitted by Vernons Pools
Vernons Pools welcomes this opportunity to respond
to the Government enquiry into the operation of the National Lottery.
Vernons submits its comments against the background
of:
— Being a part of the pools industry
for over 75 years;
— Having been part of a consortium
which bid for the Section 5 operator's licence in 1994;
— Being the first independent Section
6 licence holder for the National Lottery.
A. BACKGROUND
TO THE
POOLS INDUSTRY
The introduction of the National Lottery has
radically changed the position of the pools industry by exposing
it to a powerful competitor which enjoys substantial access to
free television promotion and a cost effective, high technology
means of distribution.
Since 1994, the pools market has reduced dramatically
from £988 million to £180 million in the current year—an
overall decline of 82 per cent. This severe financial squeeze
has led to a major fall in employment for the industry from around
5,700 in mid-1994 to around 600 today. In addition, tens of thousands
of part-time pools collectors in all areas of the country have
lost their weekly income through a substantial scaling back of
the distribution network.
Vernons in particular has seen its turnover
decline in the corresponding period from £173 million to
£26 million, with the resulting fall in employment from 1,050
to 145 today, as well as the complete closure of the collector
distribution network affecting 30,000 part-time agents.
During this difficult period of change for the
industry, the pools companies have continued to work with government
to raise £967 million in Pools Betting Duty and at the same
time, raise around £300 million for Good Causes distributed
through the Football Foundation and the Foundation for Sport and
the Arts.
The Football Foundation, formally the Football
Trust, was formed in 1990 in response to the Hillsborough disaster
with the objective of improving safety in football stadia. In
March of this year, the Foundation was formed with the objective
of supporting grass roots football and is now mainly funded through
the football authorities and the National Lottery. The Foundation
for Sport and the Arts was created in 1991 by the pools companies
and the Government to make donations to local sports and arts
projects.
In March 1999, the Treasury and the pools industry
were able to agree the future funding of all parties through an
agreement with the then Financial Secretary, Mrs Roache, which
acknowledged the need for a reduction in Pools Betting Duty from
26.5 per cent to 17.5 per cent in return for continued funding
of the Football Foundation and the FSA.
Unfortunately, since this agreement, there has
been a number of changes in the market which were unforeseen and
which have weakened our ability to compete. We are unable to invest
in the pools business at any satisfactory level to the serious
detriment of the long-term business due to the high rate of taxation
imposed upon the industry, compared with out competitors.
B. THE NATIONAL
LOTTERY AND
ITS IMPACT
ON THE
UK GAMING MARKET
The National Lottery has been an undoubted success.
Nevertheless, it has to be recognised that despite the comments
by previous Ministers about the Lottery only being a "flutter",
the Lottery is a major player in the overall betting and gaming
market. Its impact has been greatest on the pools industry with
grievous results for both turnover and jobs—although other
forms of gambling, notably bingo and off-course book-making, have
also suffered significantly. When the Lottery is encouraged to
boost income to Good Causes through introducing particular new
games, it has to be remembered that this may be at the expense
of jobs elsewhere in the economy.
In a regulatory sense, there is a danger that
Ministers in the Department for Culture, Media and Sport, who
have an understandable interest in maximising revenue for Good
Causes which are predominantly sponsored by them, may encourage
the National Lottery Commission to approve Lottery products which
undermine the coherence of the regulation of the rest of the betting
and gaming sector. Hence the Lottery's marketing of scratchcards
(generally considered to be a relatively "hard" form
of gambling) or the National Lottery operator's interest in establishing
new games played in pubs or through e-commerce channels, both
raise important issues about gaming policy such as not stimulating
demand and only making "harder" gambling products available
on licensed gambling premises.
It is arguable that all betting and gaming should
be the principal responsibility of the same government department
and that this would be best done by the Gaming Board of Great
Britain which can take a broader view of the social impact of
changes to regulation, with the Department for Culture, Media
and Sport retaining responsibility for the supervision of the
distribution to Good Causes.
Vernons Pools believes that the continuing adverse
impact of the Lottery justifies a change to the fiscal and taxation
environment that the industry operates within to create a level
playing field. In addition, any new proposed games for the Lottery
should be critically examined for their impact on other betting
and gaming areas, and that e-commerce channels of distribution,
such as the Internet and digital TV for the Lottery, should take
into account the potential stimulation of the soft gambling markets.
November 2000
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