23. Lottery duty was set at 12 per cent, which was
intended to ensure the Lottery would be "revenue neutral",
so that the Government was compensated for revenue lost from expenditure
diverted from other goods and services that are taxable to the
The Treasury conceded that it was difficult to calculate the exact
level of Lottery duty that would ensure neutrality, but stated
that 12 per cent remained "in the range of revenue neutralising
The Chief Secretary conceded that "there is an element of
course of judgement and statistical assessment here".
The Treasury stated that it occasionally recalculated the computations
on which the level of Lottery duty is based and had not found
sufficient deviation to justify a modification in the tax rate
since the introduction of the Lottery.
We recommend that the Government commission and publish an
independent scrutiny of the tax income lost as a result of the
Lottery to ensure that tax neutrality is a valid concept.
costs and profits
24. Retailers receive 5 per cent of the proceeds
of sales at their outlet plus an additional 1 per cent commission
for paying out prizes between £10 and £200. The average
annual commission has been about £8,000.
That income has been crucial for the survival of many small retailers,
who do not contribute to the cost or maintenance of terminals
or the network.
We consider the sale of Lottery tickets through retailers to
have been a success. We welcome the much needed additional income
to independent retailers provided by Lottery sales.
25. The operator receives 4 per cent of the proceeds
of sales to cover operating costs and 1 per cent of sales as profit.
The precise proportion of sales taken as profit has varied during
the course of the licence and was higher at the start of the period,
principally to cover Camelot's initial costs.
Camelot's operating costs and profits since the Lottery's launch
are £1,585 million.
Profit for 2000 was £38.5 million.
26. Camelot was criticised for the amount of profit
it was taking from the operation of the Lottery, and in particular
the payment of bonuses to senior managers in the organisation.
Sir George Russell, Chairman of Camelot, accepted that the timing
of the bonuses could have been handled better, but did not believe
that any of the senior managers had been paid too much.
According to Camelot its profits during the first licence period
were justified because of the risk to shareholders through the
costs of setting up the Lottery as a going concern. The profits
were capped and equated to one month's operation of the Lottery.
Camelot's profits were higher than expected because sales were
higher than expected.
35 A National Lottery Raising Money For Good Causes,
Cm 1861, March 1992. Back
1861, pp 1-2; For a fuller description of the creation of the
National Lottery see The National Lottery Bill [HL] 1997/98,
Bill 148, House of Commons Research Paper 98/41, 2 April 1998. Back
111; Evidence, p 3; also see Evaluating the Applications to
Run the National Lottery, HC (1994-95) 569, National Audit
Office, 7 July 1995. Back
Report from the Committee of Public Accounts, Evaluating the
Applications to Run the National Lottery and the Director General's
Travel and Hospitality Arrangements, HC (1995-96) 96; Twentieth
Report from the Committee of Public Accounts, Payments to the
National Lottery Distribution Fund, HC (1996-97) 99. Back
pp 105-107. Back
p 106, also see Memorandum from the National Lottery Commission,
Annex L Biographies of National Lottery Commissioners. Back
(1998-99) 506-I, para 29. Back
197; Evidence, p 48. Back
288, 292-293, 295. Back
p 5. Back
p 105; also see the National Lottery web site www.natlotcomm.gov.uk/frames/guide,
and the web site http://lottery.merseyworld.com for a fuller
description of the lottery prize fund and odds. Back
pp 5, 103. Back
p 5. The average individual jackpot win is less than the average
jackpot ticket win because several syndicates have won the jackpot. Back
p 105. Back
pp 107, 213, 221; National Lottery web site www.natlotcomm.gov.uk,
Lottery Guide. Back
pp 213-214. Back
p 213. Back
55 Ibid. Back
Lottery web site www.natlotcomm.gov.uk, Lottery Guide. Back
p 213. Back
610-611, 615; Evidence, p 212. Back
p 212. Back
24; Evidence, p 4. Back
24; Evidence, pp 4, 39, 103. Back
49; Evidence, pp 5, 23-24, 103; National Lottery web site www.natlotcomm.gov.uk,
Lottery guide. Back
Lottery Commission Annual Report 1999/2000,
p 7. Back
Annual Report and Accounts 2000,
p 24. Back
19, 49. Back