Select Committee on Culture, Media and Sport Minutes of Evidence



  The National Lottery is regulated by the National Lottery Commission (NLC). The NLC replaced the previous regulator, the Director General of the National Lottery, on 1 April 1999. The Commission consists of five members, all of whom are appointed by the Secretary of State for Culture, Media and Sport.

  The move to NLC was designed to ensure that the Lottery was regulated rigorously, and that there was no risk of conflicts of interest, actual or perceived. A collective decision enables different views and perspectives to be taken on board.

  The NLC is responsible for:

    —  appointing the National Lottery operator and setting and enforcing the terms of its licence; and

    —  licensing individual games that form part of the National Lottery and enforcing the terms of those licences.

  In performing its duties it must ensure that the National Lottery is run, and every lottery that forms part of it, is promoted with all due propriety; and ensure that the interests of every participant in a lottery that forms part of the National Lottery are protected. Subject to satisfying those criteria, the NLC must do its best to ensure that the net proceeds of the Lottery (that is, the money for good causes) are as great as possible. The NLC must also comply with any directions issued by the Secretary of State.

  The Secretary of State's directions to the NLC (attached) require the NLC not to licence any game which encourages excessive participation or does not have sufficient controls to prevent under-age play; not to authorise any game for which, in the NLC's opinion, ticket prices are unreasonably high; to ensure that there is a reasonable period for claiming prizes and that unclaimed prizes go to the good causes; to include conditions having certain specified effects (such as preserving the anonymity of prize winners who do not want publicity); to exercise its powers to fine the operator in line with its published principles; and to set and publish performance standards.

  Ministers play no part in the day-to-day regulation of the Lottery.


  The current Lottery operator, Camelot Group plc, was selected by the Director General of the National Lottery. Camelot's licence expires on 30 September 2001. The selection of the operator for the new licence is entirely a matter for the National Lottery Commission: Ministers have not and will not play any role in this process.


  Regulations (made under section 12 of the National Lottery etc Act 1993) prohibit the sale of National Lottery tickets in the street, and in certain premises licensed for other forms of gambling. The regulations also prohibit sales by vending machine (unless the vending machine is supervised), and door-to-door selling in people's homes. Subject to compliance with these regulations, it is for the operator and the NLC to determine, in line with its statutory duties and the Secretary of State's directions, where and how Lottery tickets are sold. Similarly, it is for the operator and the NLC to ensure that Lottery tickets are not sold to under-16s. The Secretary of State's directions require that the NLC should not licence any game which does not have sufficient controls to prevent under-age play.

  The National Lottery prize structure is a matter for the operator and the NLC. It is designed to maximise the returns to good causes whilst ensuring that the interests of players are protected.


  The most robust research on the impact of the Lottery on charitable giving is by the Institute for Fiscal Studies. This concluded that it was impossible to deduce from the evidence that the Lottery had led to a fall in charitable giving.


  The Home Office has undertaken research on the impact of the Lottery on the Horserace Betting Levy. The latest report concludes that the National Lottery has had an impact on the Horserace Betting Levy and estimates that off-course betting expenditure is around 14.7 per cent below the level it would have reached in the absence of the National Lottery.


  HM Treasury is submitting a separate memorandum which covers this point.


  The money raised for good causes is paid into the National Lottery Distribution Fund (NLDF). Annual income was almost £1.6 billion in the last financial year (excluding investment returns).

  Five good causes initially benefited from the Lottery: the arts, sport, heritage, charities, and projects to celebrate the year 2000 and the beginning of the third millennium. Each received 20 per cent of the net proceeds of the Lottery. The present Government established a sixth good cause: health, education and environment projects—areas which are a high priority for everyone in the country. Whilst the establishment of the new good cause meant cutting the shares of the others (except the Millennium stream), the amounts available for the original good causes over the life of the current licence will be higher than originally forecast because income has exceeded original expectations. Funds for health, education and the environment under the new good cause are in addition to, and not a substitute for, services already provided by Government: this principle is no different for health, education and the environment than it is for sport, arts or heritage.

  The current split of funds between the six good causes is as follows:

Arts16.6 per cent
Sport16.6 per cent
Heritage16.6 per cent
Charities16.6 per cent
Millennium20 per cent
Health, education and the environment13.3 per cent

  Six bodies distribute arts funds: the four national arts councils, the Film Council and Scottish Screen; five bodies distribute sports funds: the four national sports councils and UK Sport; money for heritage is distributed by the Heritage Lottery Fund; money for charities by the National Lottery Charities Board; money for projects to mark the year 2000 and the beginning of the third millennium by the Millennium Commission; and money for health, education and environment projects by the New Opportunities Fund.

  The Government proposes to bring forward two orders before the end of the year to extend the funding life of the Millennium Commission and to transfer its share to health, education and environment projects when its funding life comes to an end next year. No other adjustments between good causes are proposed: the Secretary of State has made a commitment that the arts, sport, charities and heritage will each continue to receive 16Û per cent for the current licence period and beyond.

  Funds are held in the NLDF until they are required by the distributors to pay grants or administration costs. There is no limit to the speed at which distributors may draw down funds (provided DCMS is satisfied that the funds are needed); nor is there any restriction on how much money distributors may carry forward over any period. The balance of the NLDF is invested by the National Debt Commissioners (mainly in gilts and securities). The return on this investment is allocated between the distributors in proportion to their balances. These investment returns are exempt from tax.

November 2000

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Prepared 16 February 2001