Examination of Witnesses (Questions 180-196)
MS DIANNE THOMPSON, MS SUE SLIPMAN OBE AND MR TONY JONES
TUESDAY 25 JUNE 2002
180. You have the stamp of approval. Let me push you on the Society Lotteries figure a little bit. Back in my dim and distant past I was a very young trainee lawyer when the Lotteries Act of 1976 was introduced. At that time I was working for a local authority and I had the job of working out how we could use this legislation because it seemed to offer the opportunity of running local lotteries to raise money for local projects. I think the experience was that virtually no lotteries were run under that Act because it was too bureaucratic; it was not feasible. Very few people actually took advantage of it. What is going to change? It is very unlikely that that situation will change for the majority of people who are likely to be running Society Lotteries. Do you seriously expect an explosion in Society Lotteries?
(Ms Thompson) At the moment Society Lotteries have a restricted pool and a restricted top prize. As I was saying earlier, the vast majority of people who play the National Lottery play because they dream of winning that huge life changing amount of money. Anything that then offers similar sizes of jackpots is a threat to the National Lottery. As Tony has said in the National Lottery—the margin level because we have a tranche structure depending on sales revenues—43 per cent of what we raise goes back to the Good Causes. We and Government pay 12 per cent—12 pence in the pound—in Lottery duty so the recipients (the Government and the Good Causes) get the majority of the money going back. What I think would change for Society Lotteries if they had been allowed to have total uncapped top prizes, is not the individual little hospice that runs their own Society Lottery—there are quite a few of those who do it quite successfully—but if you could actually have a joined up Society Lottery. If I was one of my big national retailers—somebody like Tesco, for example, who are the largest retailer for the National Lottery in terms of turnover—then I would see a real opportunity to fund my corporate social policy through running my own lottery. I think that is the real risk for the National Lottery, if somebody like Tesco joined up with one of the more popular charities and ran their own lottery through their own terminals rather than selling National Lottery. They would not have to pay the 12 per cent Lottery duty so they would have more money to give back to players. By law, at the moment, they only have to give a minimum of 20 per cent back to the charity concerned. Of course, they could choose popular charities and we know from our research with our players that our players would love to see money go into health and education. But if it all went into those areas a lot of less popular charities would actually lose out. I would like Sue to comment on that as well, if I may.
(Ms Slipman) I only want to add something very briefly, which is that £11.3 billion has gone in over 97,000 grants to projects that would never have had access to that money through any other distribution method. the National Lottery was set up because it was seen to be the most efficient way of raising money for Good Causes. There was some consternation amongst particular organisations like the National Council for Voluntary Organisations at the proposal about Society Lotteries because they could see a range of causes that were not necessarily popular but were quite critical to things like the regeneration of projects.
Chairman
181. Like the Winston Churchill Papers?
(Ms Slipman) They may have had some criticisms of those. As we know, part of the problem is that what has captured the Press' imagination are those grants which have not proved to be so popular amongst the population as a whole, whereas we know that there is extraordinary work going on right across the country of communities that have benefited enormously. It may not be uniform enough; it may not be fair enough in all constituencies across the country. But it has had an enormous impact, that money. There is a lot of concern that it would be the less popular charities that would lose out and those that were more easily accessible to local popular causes would not get the money.
Mr Doran
182. I can understand your concern as a company. I am not sure what evidence you have for even suggesting that organisations like Tesco and perhaps the other supermarkets would put something like this in place. Let us assume you are right. Some of the larger charities that I have had some contact with—McMillan, for example, McMillan cancer care who are a very active charity, constantly fund raising—if they set up their own Society Lottery (which, under the new proposals they would be entitled to do) from my perspective can I suggest that in some respects they would simply be cutting out the middle man. The money that you take in profit—the one per cent or half per cent or whatever it is—would mean that is a little bit extra to go to their Good Cause which is quite clearly defined and is a very popular cause. But none of us would be losers as a society. Camelot as a company might be a loser. Why should we follow your lead?
(Ms Thompson) If I may start, I cannot comment on McMillan at all; I have no idea what their operating costs are. If I could talk about us compared to other lotteries around the world which are not profit making, we have been ranked as the most efficient lottery in the world for the last four years. We actually fell into second place last year. Efficiency being the amount of money that we retain within the Lottery to run and operate the National Lottery and the money that goes to the Government and Good Causes. I personally believe very passionately that it is the profit motive that keeps us so lean and mean. Our operating costs are just 3.5 per cent out of every pound. We own all the terminals; we own the network. Our retailers pay for nothing apart from the line going into their outlets. We also have 25,000 retailers on line and a further 10,000 retailers who sell instant scratch card tickets. They take five pence in the pound commission plus point two pence for every prize that they pay the winnings out for up to £10,000. For a lot of those retailers the National Lottery coming along was an absolute life-line. It came along at the same time as newsprint was being de-regulated and so you could buy your newspapers in Woolworths or Tesco or wherever and a lot of those small independent retailers would have gone out of business without the National Lottery. I think it is not only the money to the Government and the Good Causes, but it is the revenue that goes to our retailers. As I say, the half per cent that we retain I think has made us run this Lottery incredibly efficiently.
183. I understand that, but you have not quite answered my question. In some respects many charities and Good Causes will see you as the middle man. They could cut out your take, as it were, your share of the cake, by operating their own lottery. We would not be losers because they would still be raising money. There may be an issue about newsagents and retailers across the country, but that does not mean to say they cannot be selling these other tickets as well. What is it in your position for the rest of us, rather than just Camelot?
(Mr Jones) You are talking about cutting out the middle man, yes that could be done, but the really important thing is that the size of the overall cake would come down significantly and what would actually happen is that the larger charities such as McMillan perhaps—and may be the well known ones—would certainly benefit as Sue said at the expense of some of the other 97,000 good causes that have actually benefited under the current distribution system. The rationale for having the National Lottery as a monopoly in the first place would really be dissipated by allowing Society Lotteries to potentially expand to the sort of level that might become the case were the regulations relaxed.
Chairman
184. Following on Mr Doran's final question, nobody can argue with the fact that large sums of money are going to Good Causes. But that is not happening out of the goodness of your heart. That is the law. That is the way the Lottery is set up. You have been very lucky, have you not, because first of all the Labour Government junked its policy of handing over the Lottery to a no-profit organisation so there you are, you are an organisation, a privately owned company, set up to make money through the Lottery (which is a perfectly reputable thing to do under the law), but you are very heavily protected, are you not? The result of your existence has been a dreadful effect on, for example, the football pools industry where huge numbers of jobs have been lost in traditionally high unemployment areas as a direct consequence of the existence of the Lottery and the protection to the Lottery which is not afforded to any other gambling or gaming organisation. That has had a deleterious effect on Good Causes because the football pools voluntarily set up the Foundation for Sport and the Arts and the distribution to Good Causes from that has been affected seriously adversely by the effect of the Lottery. So there you are, nobody is questioning your legal status, nobody is questioning the consequences of what you are doing; no-one is even arguing that you do not make sensational profit on turnover, but nevertheless you are really protected in a way that no other gambling or gaming organisation is by legislation. I would be interested to know why you think that is justified because, I repeat, you are a privately owned company set up to make profit.
(Ms Slipman) I think we have to go back to the reason the National Lottery was set up in the first place. This is a unique bit of the gambling industry; it is the only one that returns 44 per cent to Government and Good Causes. Therefore the logic of having such an organisation set up on that basis of efficiency is that if you open it up to competition on exactly the same terms then you dissipate the pot, you reduce the amount of money ultimately that goes to Good Causes because people play the National Lottery for life changing amounts of money as we know; they do not play it to give money to Good Causes. But increasingly, as the Lottery matures, they are jolly glad, if they do not win, that their money does go to Good Causes. This is an integrated organisation, the National Lottery. If it is to work as a brand then it has to work by offering players what they want and giving the returns back to Government and Good Causes that it gives. Our evidence on the three aspects of the Budd proposals—of the 176 proposals—the critical ones are Society Lotteries and side betting. Our response on those was that if you allow Society Lotteries to compete on exactly the same terms and offer life changing amounts of money, you would reduce the overall pot and therefore reduce substantially the returns to Good Causes and Government. That was the argument we made and we did that through independent research and presented that case to Government. Clearly the Government has accepted at least in part that case because it has recognised the impact. The Causes are the Government's own Causes, the Government set up the Causes to distribute money on its behalf, as it were. That would be the outcome. We believe that those protections, given the unique role of the National Lottery, are reasonable ones. What we are not saying is that we wish to exist in a non-competitive market. There is going to be plenty of competition from the liberalisation of gambling that will go ahead. And there is competition at retail because of the impulse nature of National Lottery products. We face an increasingly competitive market but what we are arguing against is those critical things that would do the most damage and the most immediate damage to the efficiency of the National Lottery and its ability to raise money for Good Causes.
185. There are those who might describe that argument as specious because after all you are not in business out of the goodness of your hearts. You did not—and any other company which had got the Lottery franchise, I am not saying this about you specifically—go for the franchise because you had this great yearning to provide vast sums of money for Good Causes. You went into this because—a perfectly reputable thing to do in a free market society—because you saw that it was a very good way of making a great deal of money. All of these other arguments that we can form about the impact upon the Good Causes and the possible adverse impact on Good Causes of any legislation which will lower the protective barriers are adventitious arguments, are they not. You can put them forward, you may well be accurate in what you are saying, but in the end you are running Camelot to make as much money as you can for Camelot (which the law allows you to do). I find it difficult myself taking into account some of the destinations of the Good Causes money (such as £120 million for Wembley Stadium) to be totally convinced that you should not—though I hate this piece of phraseology—have your playing field made rather more level as a consequence of the Budd proposals and the Government's legislation.
(Ms Slipman) If what we are saying is true on the impact on the Good Causes, then it has to stand as an argument. If it is going to make that impact then the Government has a choice as to whether or not it wants that impact to be made. Clearly, as I understand, distribution has nothing to do with Camelot; we have no influence over where the money is distributed. What we do know is that it increasingly matters to the players of the National Lottery that they know where their money goes. It is now the biggest demand that we have from the public, the right to know what is happening to the money they spend on the National Lottery and where it is going in terms of distribution. I think it is clear that we are incentivised to run an efficient operation and that is what we do, but we do it in the interests of the Good Causes because that is actually the heart of the task and we would not make a profit if we did not do that well.
186. When you say that you do it in the interests of Good Causes I would guess that that is the secondary objective. The primary objective is for you to be successful and for your company to make money. I do not know whether I have the words absolutely right, but in his musical Alan J Lerner said "I think there never was a more delightful spot than Camelot". You did fight very, very hard to remain in that delightful spot.
(Ms Thompson) You may find this very hard to believe. We have seven strategic objectives. Our first strategic objective is to maximise the returns to the Good Causes in a socially responsible way. Objective six is actually about returning profit to our shareholders. We do care passionately about the National Lottery which is why I was prepared to fight so hard to try and retain a second licence. We do believe that we do a pretty good job of doing it. You said you though Camelot were lucky. I think the National Lottery has been lucky to have some efficient operators as we are.
Mr Flook
187. What percentage of the gambling market do you have, in your estimate?
(Ms Thompson) Twenty per cent.
188. How many problem gamblers do you have?
(Ms Slipman) In the Gambling Prevalence Study where the problem gamblers were about point eight per cent of the population and of those that only played the National Lottery it came down to point one per cent. One of the measures we use on the problem gambling front is the calls to the GamCare helpline. Those have never been more than 3 per cent in relation to the National Lottery. This year they are 0.5 per cent. So a very minimal number of problem gambling is associated with the National Lottery.
189. Are they your figures?
(Ms Slipman) The GamCare figures.
190. Except that, I think we know, the number of people who are likely to play the Lotto are likely to come from a poorer element of society than those who might walk into a casino.
(Ms Slipman) There is a reasonable spread across all class groups. It is true that the majority come from C1 and C2 and then less from D and E proportionally and in terms of the amount of money they spend it is reasonably proportionate across the classes.
191. I see from your submission and I take your point that you should be separate from the Gambling Commission because you have a unique role in returning money to Good Causes, but at the same time you feel it is inappropriate to be a permanent member of the Industry Trust that is helping those individuals who have a problem with gambling. I can see why you might not want to be part of the Gambling Commission but I think that because of your size and prevalence and the importance you play in getting people to gamble at all—and more—that you do not want to be a permanent member of the Trust. Could you expand on that a little, please?
(Ms Slipman) I think it is worth saying that in terms of the Gambling Commission the arguments there are: one, that we are unique as we are returning money to Good Causes. The second is that there will be a very legitimate conflict of interest—if we were part of a single Gambling Commission—between the responsibility of the regulator to maximise funds for Good Causes and the regulators' duties to the rest of the gambling industry. We think it is that genuine conflict of interest that means that we should remain separate. I know there is an argument that you could give the duty to maximise money to Good Causes to the operator and if you did that then if the operator came into conflict with the regulator about the protection of the National Lottery there would be no redress. So there are genuine conflicts about being part of a single commission. In terms of the Gambling Industry Trust, whilst the responsibilities of the Trust are to treat problem gamblers rather than the prevention overall of problem gambling, we think it is right for us to remain separate. We make a huge investment—£1.7 million over three years—to prevent problems and that is clearly paying off in terms of the GamCare figures and everything we know about the National Lottery. The majority of our players do not see themselves as gamblers and they do not play other kinds of games and they do not gamble anywhere else. They see themselves as being utterly separate. We do realise that we are part of the gambling industry. We are very keen to share what we have learned about how you successfully prevent problem gambling with the Gambling Industry Trust and we will go on working with them. But in the meantime we have a separate relationship with both GamCare and Gordon House and we do invest in treatment, but we do it outside of the Gambling Industry Trust.
192. In an earlier session we heard evidence that only £700,000 or £800,000 has been raised towards the Trust's target of £3 million. How much have you given towards that £700,000 or £800,000?
(Ms Slipman) We have not given any money to the Trust. We have invested this year £533,000 in the prevention and treatment of problem gambling as an organisation.
193. With 20 per cent of the market?
(Ms Slipman) With 20 per cent of the market.
194. In other words, you would expect the rest of the industry to come up with the other four fifths which would mean that you are looking at something like £2 million in total, yet they are looking for £3 million. So you are not even pulling your weight totally.
(Ms Slipman) I think you have to look at the proportionate responsibilities for the creation of problem gambling in the first place. the National Lottery is responsible for very little of the development of problem gambling that exists.
195. Can I just stop you there. One of the issues that also came up is that we do not know very much about what causes problem gambling and what can make it worse. So I do not think you can say at one point that you are giving money and at the other point that because of the statistics in this country we do not know very much about it. I am just asking, would it not be more helpful from a public relations point of view to be seen helping those who do fall through and are problem gamblers?
(Ms Slipman) We do help problem gamblers. We financially support GamCare—
196. Help them more?
(Ms Slipman)—and Gordon House and we work very closely with GamCare in developing strategies to prevent problems. That is where we believe the effort should go. Certainly at this stage I think that in liberalisation elsewhere—particularly in Australia—it doubled the number of problem gamblers. That would be a consequence of the liberalisation of the market that there will be more problem gamblers. But they will not be created by the National Lottery. We believe it is really important for the health of the National Lottery brand that people have confidence in it protecting them and that is what we do and that is what we invest in. We will continue to make that investment. As I said, we are very happy to share everything we have learned with the Gambling Industry Trust and also, if there is a Gambling Commission set up, there are going to be codes of practice and we are very happy to contribute to those and develop a more preventive style within the gambling industry itself.
Chairman: Thank you very much indeed. It is always a pleasure to see you here.
(Ms Thompson) It is always a pleasure to be here.
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