Examination of witnesses (Questions 360
- 378)
THURSDAY 23 NOVEMBER 2000
LORD BURNS,
MS HARRIET
SPICER and MR
MARK HARRIS
Mr Faber
360. Can I just follow on, on the legal side,
for a moment. In his judgment, on 21 September, the judge referred
to a letter from the Commission, which the Commission had sent
to Camelot on 28 July, and Camelot told the court, and I quote,
that they took the contents of the letter "to have removed
any problem of fitness and propriety in relation to the application
for a new licence." Was that letter written as a result of
legal advice, or as a result of the Commissioners' views?
(Mr Harris) The letter was written as a result of
legal advice; it was drafted on the advice of the Commission's
lawyers.
361. Because it seems to be, if the legal advice
you had had was that there was, and I think the expression you
used was, a problem with all due propriety, under the Act, Section
4(1)(a), why was the letter then sent to them, as late as 28 July,
suggesting to them that there was no problem with the fitness
and propriety?
(Ms Spicer) That is the very essence of the misunderstanding,
that letter. We stated what was the fact at that time, in relation
to the current licence. I am on record, in a transcribed meeting
with Camelot, as saying that, for the avoidance of doubt, the
Commission would wish both, in pursuance of its duties, to be
as clear and as open at all times as is possible and to gain any
benefits of management of expectations. For the avoidance of doubt,
we should have included a reference to the future licence. The
fact that we saw it as having no bearing on the licence itself
was our mind set. Obviously, one would have wished to avoid the
misunderstanding which did arise, and I am on record as saying
we would have wished that it had not. The point of fact is that
while it might have had other beneficial implications had we done
so—many and various—and I am sorry those were not
available, because it was not there, Camelot could not have altered
materially their bid in the light of such information, had it
been included.
(Lord Burns) I think that we should be quite clear
about the status of that letter, both what it referred to and
the relationship between it and the bidding process. Because I
think it may not be quite as it sometimes seems.
(Mr Harris) The letter was in response to work the
Commission had been carrying out in the context of the current
licence, and it was an investigation into some actions taken by
GTech, that have been partly revealed in the press, about GTech's
decision not to disclose that there had been a problem with the
software that it had subsequently been fixed. Now the Commission
was carrying that out under particular responsibilities that are
around "fit and proper" and, having completed its investigation,
having completed its work, having received assurances of things
that would be done, from Camelot and GTech, the Commission decided
that at that point it was not going to proceed further with a
preliminary view that it had reached that GTech was not fit and
proper.
362. It was not going to proceed?
(Mr Harris) It was not going to proceed further at
this stage, given the assurances; those assurances had not yet
been delivered but they had been given, and it had therefore decided
not to proceed further.
363. And that was on 28 July?
(Mr Harris) On 28 July. What that letter did not say,
and I think Harriet is saying, with hindsight, the Commission
should have said, was that that was not an indication that the
Commission had decided, in terms of the next licence and its evaluation
of the next licence, that the "all due propriety" test,
which is a different test and the Commission was advised should
be applied differently, had been met. Therefore, Camelot, on reading
that letter, and now looking back you can perfectly well understand
why, believed that for the new licence purpose it was okay; in
fact, in the Commission's mind it had dealt with one of the issues,
the current licence "fit and proper" issue, it had not
yet cleared—
364. So there was another issue that arose between
28 July and 23 August?
(Mr Harris) No, it was the impact of the same issue
applied to different tests.
(Lord Burns) Could I add; because there is one other
thing which I think Mark may wish to say. Although it was obviously
unfortunate that it had not been made clear in the letter that
it did not apply to the licence as a whole for the next stage,
it would not actually have made any difference if it had been
in the letter. It might have reduced the amount of surprise that
took place, but it was actually too late, at that stage in the
bidding process, for the bid to be rectified within the framework
of the ITA.
365. In that case, can one of you give us an
explanation, which we have not actually had yet today, of why
Camelot was ruled out as an operator on 23 August?
(Mr Harris) Because, in carrying out its evaluation,
the Commission could not be satisfied that Camelot, with GTech
playing the role that was proposed in its bid, would be able to
operate the Lottery with all due propriety, it could not be certain
that the 31 steps that had been promised would actually be put
into place. It was agreed that it would take a period of time
for those steps to be put into place, and the Commission was making
a judgement, in terms of the new licence, on something that would
have effect for seven further years from the end of the current
licence. And the Commission, based on its own deliberations and
its discussions with Camelot and GTech up to that point, believed
that it would not know whether these things had been put into
effect and really made to bite to ensure that the future propriety
of GTech could be delivered, it could not be sure of that within
the timescale it had set itself for making a final decision on
the current licence. And the mistake the Commission made was to
assume that there was not an alternative strategy, which is the
one that Camelot made and argued in court and has subsequently
provided.
Chairman
366. Those sound very definitive criteria, and
they led you to exclude Camelot; if those criteria were so definitive,
how can you now be able to consider Camelot as a viable bidder?
(Mr Harris) Because what the Commission had not identified
and Camelot subsequently did identify was that they could change
their arrangements with GTech such that Camelot own the software,
Camelot take over GTech, who will run that software, and therefore
they changed their entire relationship; and that is what Camelot
have done and they are on the record as saying they have done,
and that is the step that has answered the Commission's concern,
in principle.
367. Why could you not have told them that at
the time and given them an opportunity to put it right, as you
are now giving them an opportunity to put it right?
(Mr Harris) I think the answer is, as Harriet has
said, if—
(Ms Spicer) There were responses they made, there
is a list I have here of various actions they took, which led
us to issue the letter that Mr Faber mentioned. So, just as we
are talking about inappropriate assumptions and could things go
further, those looked to us at the time to be the actions they
wished to take in respect of this issue, such as the departure
of the two most senior members of the GTech Board, and a whole
list of actions around that issue. And they did not offer, at
that point, had they offered, this is the unknown possibility,
but they did not offer us the essential differences. We were not
offered the rectified process at that point; we now have been.
Mr Faber
368. What I was going to say, Lord Burns, was,
I often think one of the weaknesses, one of the few weaknesses,
of the Select Committee system is that, very often, a Committee
such as ours undertakes an inquiry into some previous shambles,
or disaster, and very often the people who are actually responsible
have moved on, they have been fired, or they have resigned, and
they have flown, and it is often people like yourself who appear
before us and then have to answer for events that took place before
you arrived. What is your personal view of what took place in
the summer; you have had a chance now to go through all the papers,
to read the legal advice, to look at everything, what is your
personal view of what happened in the summer?
(Lord Burns) I have not got a definitive view about
this. This may sound a rather lame excuse, but I have spent the
time that I have been involved in this dealing with the question
of the future and trying to make sure that—
369. But surely there is a lot to be learned
from the mistakes of the past?
(Lord Burns) I did spend a lot of time looking at
the papers, and I looked at the judgments. I do not have a great
deal to add to what Harriet has said. It seems to me, the fundamental
error that was made was to assume that Camelot, within the timescale
concerned, was not able to repair its relationship with GTech;
that it was going to take time in order to see whether or not
they were fulfilling the changes that they had promised. That
timescale was beyond the timescale that was involved in coming
to a decision for that bid. And it seems to me that it was a mistake
to make that assumption. They should have left that to Camelot
actually to determine whether or not it could rectify its bid.
The problem was that, as Harriet has said, there was a concern
that going into a process and asking two people to continue to
bid, when there was a firm view that one of the bidders could
not meet the timescale, was actually unfair to that bidder. It
was suggested that action would create an artificiality about
the process, and that that action would be difficult to defend.
But I came to the conclusion that this was—and the most
important thing from my point of view—an error of interpretation.
That it was an error of judgement, it was not an error that stemmed
from any bias or from any prejudice towards either of the bidders.
370. As you said, in an answer to Mr Fearn earlier,
the Lottery is perceived as having been a great success over the
years it has been going; every now and again there is a periodical
bout of bad publicity, normally not anything to do with the Commission,
normally, as to how the money is distributed, which arouses the
public's passions. But do you think that, ironically, on this
occasion, the Commission themself have brought the Lottery into
disrepute?
(Lord Burns) I do not think they have brought the
Lottery into disrepute. I think that it has been an unfortunate
episode. It has brought a lot of bad publicity. It has brought
a lot of attention that the Lottery could have done without. But
I do not think it has brought it into disrepute and to suggest
that the Lottery is tarnished in some way. There are certainly
no signs of this, in terms of people's willingness to play, and
there is certainly no lack of people who wish to benefit from
the money that is spent on good causes.
371. It has caused great concern and uncertainty
though amongst retailers, amongst the employees of Camelot, indeed
amongst the bidders themselves?
(Lord Burns) It has. The process of bidding for this
type of thing has got lots of difficulties associated with it,
and I am sorry that the problems of the summer have meant that
that whole process has continued. Clearly, there was a period
of uncertainty, on behalf of the retailers, about what it all
meant, because we were facing at one stage the possibility of
an even longer delay in coming to a conclusion, and people clearly
were concerned about that. I hope that we have now put in place
a system and a process which is going to get us to a decision
reasonably soon. We have made a lot of good progress with Camelot,
in terms of the design of an interim licence, to take us through
the period from when the present licence comes to end and when
the new operator can begin. I think that that, by and large, has
probably stabilised the situation. So I do not expect any long-term
damage, but, clearly, it was an unfortunate event and one that
we could have done without.
372. Finally, Ms Spicer, I should exclude you
from my remarks earlier about people never appearing before a
Select Committee, because I think your comments to the Chairman
earlier, admitting to a mistake, were very candid and to be welcomed.
Were they an apology, as well?
(Ms Spicer) I would always feel it necessary to apologise
for a mistake and wish to have done better.
Mr Keen
373. First of all, can I pick up a couple of
points that have been raised by colleagues. First of all, I do
not think Claire was too serious, but she spoke with a certain
amount of sarcasm when she mentioned Professor Walker and saying
he had not bought a ticket. Would you just confirm that you agree
with me that if he had to rely on buying tickets rather than mathematics
he would have had to buy not one or ten but something like 14
million tickets; is that not right?
(Lord Burns) By and large, statisticians do not work
by going out and repeating the experiments the sufficient number
of times. Statistics is all about being able to infer from observed
data what the likelihood is of various events.
374. The other point, raised by Ronnie Fearn,
I think, is quite important. I think there is some misunderstanding
on the quotation by Sir Richard Branson, when he said there is
no risk in running a lottery. People have not understood, the
same way as I understand, I have given some thought to it, I believe
that he was talking about no risk in running a lottery looking
at it from the commercial point of view, from an operator's point
of view, and there is little comparison between deciding to set
up a company to manufacture motor vehicles and sell them and being
a lottery operator. I think what Sir Richard Branson meant, do
you agree with me, was that, to the lottery operator who does
not have to invest too much capital in it and yet has a massive
turnover out of which to cover the operating costs, I think, do
you agree with me, that is really what Sir Richard meant?
(Lord Burns) I do not want to be unhelpful, but I
am not sure it is very helpful for me to try to speculate on what
Sir Richard Branson meant. I answered earlier my view that there
are risks associated with running a lottery. Nevertheless, what
is also clear is that there are always plenty of people around
the world who wish to run lotteries when people have lotteries
to run. And, by and large, people have been able to make profits
out of it, which is also why it has been important to regulate
them. They are in a monopoly position, once they have the licence,
and it is important that one has regulation. But I think it would
be a mistake to think therefore that it means there are no risks
that are associated with it, and certainly it is not the case
that one operator cannot do better than another operator.
375. Why I wanted to try to clarify was because
obviously there are risks, there are risks to a person's reputation,
tremendous risks, but that is why I think that, the statement
that there is no risk to an operator, he was referring to the
commercial risk, invested capital. Coming on to another issue,
it is true, is it not, that really the biggest problem that we
are faced with now is, and it is the nation's problem, if a decision
is taken to change from one operator to another, the biggest problem
really is the risk to the total money for good causes at this
changeover period? Would it not have been a better system, and
again you have got to look back before the Commission was set
up possibly rather than just before you became involved, had there
been a system whereby the tenders were asked for the technical
equipment to run it, and that not being part of just giving, this
is an alternative, the operator licence really to one company?
Had some organisation been set up, even the Commission itself,
to get tenders for the electronic equipment, in that case then
that would be owned by the Commission, this is the point I am
making, rather than it being owned by one of the operators, then
they have got the problem of how is the switch-over, I think it
was Derek Wyatt who raised the point of how do the retailers fit
two lots of equipment in the restrictive space in their shops;
and I think it is more like six months rather than three weeks
that Derek mentioned?
(Lord Burns) There are lots of parts of the world,
of course, where the lottery is operated in a different way from
the way that it is done here, where there will be a lottery board
who then, themselves, put out contracts to various suppliers.
That is not the arrangement that was chosen here. The legislation
has set out how it should be done here, which is that the licence
should be given to one company to do it. But, I think, if at any
stage you are going to change your gaming software, even under
the type of arrangement that you talk about, there will have to
be an issue of handover, whereby you may well change the terminals.
This requires a period of training. You may well be changing the
nature of the game, when you change your gaming operator, and
that, inevitably, introduces many of the same issues.
376. Technology is improving tremendously.
(Lord Burns) If you want to have a lottery on one
Saturday by one operator, and a lottery on another Saturday by
a different operator, you have got to put in things to make sure
that it actually works, and you cannot hope to do all of the work
over the seven days that are concerned. The natural thing to do
is to put in a parallel system and get that one up and running,
so that you can make the seamless switch between one system and
another. Now, clearly, that is going to involve, as I said earlier,
a certain amount of inconvenience. The only point that I make,
and I make it quite strongly, is that that is part of the price
that has to be paid for having competition in this area, and it
is through the process of competition that we really get the returns
to good causes; because if you only had appointed one operator,
who was then going to be in place for evermore, my expectation
would be that, over the longer term, there would be much less
money for good causes that would come from the Lottery.
377. On the same point, the Culture, Media and
Sport Department runs virtually everything at arm's length; now,
presumably, they have no experts on running lotteries in the Department,
I do not know what they would be doing if that was all they did
anyway, so your Commission is becoming the accepted expert in
this field. Is it your duty in the future, I am not talking about
some day in December, I am talking about the future, is it your
duty really to look into other ways actually of awarding the Lottery;
we know what is going to happen in December, it is one, either
A or B, but in the future should you have the responsibility and
will you take it on yourself to look at other ways of doing it,
rather than having an operator, and recommend that the legislation
is changed?
(Lord Burns) It is not a responsibility of the Commission,
to decide whether or not the present arrangements that are set
out in legislation are correct. It seems to me that that is an
issue for the Government, and it is an issue for Parliament. It
seems to me that the best way of approaching this, at some stage
in the future, is to have a committee, such as yourselves, or
the Government should do it themselves. They should look at the
whole question of whether they are satisfied with the arrangements
which are in place. What I have said is that, no doubt, before
I have finished this job I will have formed my own views about
that, and at some stage in the future I am more than happy to
give to anyone, if they are prepared to listen. But it is not
part of my responsibilities. It will be simply my observations,
as someone who is interested in public policy, and it may even
be to do with my responsibilities down the other end of this corridor.
Mr Keen: I understood there was not really
a responsibility, as determined already; but thank you very, very
much, that is very helpful.
Chairman
378. Could I ask you just one final question,
Lord Burns. There is a new spate of litigiousness among people
whose fates are decided by public bodies such as your own. ITV
went to court against the ITC on the News At Ten issue; your sitting
in that chair is a consequence of legal action against your Commission.
How confident are you that when you have made your decision, since
there is bound to be one disappointed party, that party will not
go to court to try to get your decision either reviewed or overturned?
(Lord Burns) I cannot be confident of it. But can
I put it this way, that I am very conscious of that. I am very
conscious that this is an issue, and, therefore, every step that
we take, in terms of the process that we are going through, we
are taking into account the fact that this might end up that way.
And, furthermore, to try to prevent it ending up that way, we
are trying to follow a procedure which we can explain at the time
that has been followed which is right for the purpose. And so
I think it would be wrong of me to say I am confident of it. All
I can say is that I am conscious of it and that we are doing our
best, in the light of that consciousness, in order to try to avoid
that circumstance. In the United States, not only is it generally
a litigious society but I think there has been quite a lot of
litigation surrounding lottery bids as well.
Chairman: Thank you very much, Lord Burns
and your colleagues; thank you very much indeed.
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