MEMORANDUM SUBMITTED BY THE DEPARTMENT
FOR CULTURE, MEDIA AND SPORT
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
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
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
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 projectsareas 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:
|Arts||16.6 per cent
|Sport||16.6 per cent|
|Heritage||16.6 per cent
|Charities||16.6 per cent
|Millennium||20 per cent
|Health, education and the environment||13.3 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 16.6 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.