Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 60-79)



  60. The conclusion you have signed up to says, "This suggests that to be successful a competitor must submit a bid that is sufficiently less risky or sufficiently more generous to good causes to outweigh the risks involved in a hand-over." I take it you accept that?
  (Mr Harris) I accept that that view was expressed in the Report.

  61. That is not good enough and it never is for this Committee. You have signed up to this Report. It is an agreed report. Are you now telling us you disagree?
  (Mr Harris) I am not seeking to disagree with the Report, no.

  62. It is not just a matter of accepting that that is what the Report says; it is an agreed conclusion that you have come to with the C&AG and the Department and the Commission.
  (Mr Harris) Yes.

  63. How could a challenger ever dislodge an incumbent, given that the People's Lottery offered to give all the profits to good causes and still lost?
  (Mr Harris) They key thing is the judgment about which bid will produce the best possible return for good causes.

  64. That can only be on the robustness of the total projected money raised. Is that correct?
  (Mr Harris) Yes.

  65. Have Camelot's projections been proven correct?
  (Mr Harris) No.

  66. Let us go to page 30 and National Lottery ticket sales. Would you run us through that and show how far out from that projection Camelot's actual sales are? Could you interpret the figure for us?
  (Mr Harris) If you continue the line from the first licence, that will give you a sense of where Camelot's present sales are.

  67. At the time of writing this Report, is it not right to say that they were about ten million or 25% down on what they had projected? Is that the difference between £41.379 million and £31.949 million?
  (Mr Harris) I am sorry?

  68. It is the difference between £41.379 and £31.949 million—£10 million. Approximately 25% of the projection?
  (Mr Harris) Assuming their line continues like that for the licensed period, yes.

  69. Let me ask you this, then: if The People's Lottery had achieved the lesser figure here, the lesser ticket sales, how much more money would have gone to good causes? It is not a statistic we have here in the Report but perhaps it is one you could prepare and do for this Committee. If the ticket sales had been on the projection that The People's Lottery had given, and they would give all the profit to good causes, how much more would have gone to good causes? Would you provide a note to this Committee of that? ". . . The People's Lottery considered the retail data to be of little use to its bid . . .", incomplete, unrepresentative and inconsistent (paragraph 2.25).
  (Mr Harris) Yes.[2]

  70. Now, your job was to ensure a level playing field between the bidders, and you failed to do that?
  (Mr Harris) Our job was to ensure a level playing field between the bidders as far as we could. This information was not held by us under the terms of the first licence; it was held by Camelot. We sought to negotiate with Camelot that they would make this information available. For reasons set out in the report, they were only prepared to make certain of it available—information on independent retailers—and for reasons of the Data Protection Act, that information had to be agreed with the individual retailers before we could make it available. We sought to do so. It is exactly as set out in the report—that not all the information that The People's Lottery would have wished to receive was made available. We have in the second licence made provisions for transfer of intellectual property around retailer details and made sure that the agreements with retailers enable us to make that information available next time round. We did the best we could to make information available, but I quite accept it was not all the information that The People's Lottery would have wished to receive.

  71. Paragraph 2.24 says, "Under the terms of the first licence, Camelot was obliged to provide the Commission with management information, such as sales by region and type of retailer. . .".
  (Mr Harris) Yes. That is right.

  72. That was something they were obliged to do. Now you are saying for all sorts of reasons Camelot declined to do it.
  (Mr Harris) No. I am saying they were obliged to make certain information available—sales by region and type of retailer—and that information was made available and it was made available to The People's Lottery, so they knew the number of terminals by type in regions and the number of terminals by type of retailer. What they did not know was where all those terminals actually were—on which street, in which retailer; they did not have details of all the individual retailers and that is what they were seeking to know. We did not have under the first licence the ability to require that as management information and make it over.

  73. Thank you. I refer you to paragraphs 3.13 and 3.14, and I apologise to you if I am going over some of the ground that Mr Williams went over but he does it with such finesse that I can sometimes just not follow him quickly enough! As I understand it, in August 2000 the Commission rejected Camelot's bid. That was on August 23.
  (Mr Harris) That is correct, yes.

  74. At that stage you rejected that bid on the grounds of propriety basically, is that correct?
  (Mr Harris) Yes.

  75. What I am confused about is that, on 25 July 2000, the Commission had decided that it would "take no further steps towards a finding that GTech is not a fit and proper person to manage part of the business of running the National Lottery, given that the substance of the Commission's concerns will be met if the undertakings by GTech and Camelot are discharged". Now it may seem a very obvious question but why, when you decided to reject Camelot's bid for the second licence because of concerns about propriety, were you happy and had been happy since 25 July—indeed, since 23 June and some would say even since 12 April (paragraphs 3.13, 3.11 and 3.06)—to allow them to continue to run the Lottery? What I do not understand is how simultaneously you say "They are not fit and proper persons to be allowed to bid for the second tranche, and we can take that decision", but at the same time you say, "But actually we are quite happy for them to go on running the Lottery as it stands"?
  (Mr Harris) There were two separate tests that the Commission had to consider, both of which are laid down in the legislation, one of which was a test whether the Commission had sufficient evidence to find that GTech was not a fit and proper organisation to be involved in the management and running of the Lottery and, as a result of the GTech investigation and the concealment, the Commission came to a provisional view in June that it was minded to find GTech not fit and proper. GTech then, and Camelot as well, took a range of actions including removing all the individuals, or all the individuals who had been involved left the company, and the company gave a whole range of commitments and undertakings, and the Commission having considered this very carefully in July came to a view that it did not have sufficient evidence to find GTech not fit and proper at that stage, because of all the changes that had been made. Nonetheless, the Commission was of the view that this was a provisional finding because a lot of the commitments had not yet been put in place and could not be put in place for a period of time, and the Commission was very concerned that GTech, for reasons set out in the Report, had now come very close twice to being found not fit and proper. It therefore could not be satisfied that GTech, looking forward and playing the role it was playing within the Camelot bid, was likely to meet the other test—to accept a bid the Commission has to be satisfied that the bidder is likely to operate the Lottery with all due propriety. Granting a seven year licence, given the uncertainty about how GTech would behave in future, would not ensure the Lottery was run with all due propriety.

  76. I have given you a lot of rope there even though I am pressed for time, but what you have told me is that the interim decision on 25 July was that you did not yet have enough to pin on Camelot but by August you did, because in August you took the decision not to allow them to bid. What I cannot understand is how you can, in August, exclude them from the bid on the grounds that they are not fit and proper, and yet in August be quite happy to let them continue running the Lottery, presumably on the grounds that they are fit and proper. If you knew that they were not fit and proper to bid in the second round, you must have known that they were not fit and proper to be operating the thing in the first place. What you have told me is that you had two irreconcilable facts, and you decided to call them a paradox instead of a contradiction.
  (Mr Harris) No. We had a single situation whereby we had two different statutory tests to apply; one was whether or not we had sufficient evidence to determine that they were not fit and proper to be involved in the Lottery, and the Commission considered that and concluded that, having taken full advice it did not—

  77. That was in July.
  (Mr Harris) That was in July.

  78. And let us be absolutely clear: you did not say that you did not have enough at the time. You said that you would take no further steps towards a finding. You were not going to pursue the matter, yet within one month you had enough information and you took a decision that they were not fit and proper, so why did you let them go on running the Lottery?
  (Mr Harris) What we also said in July was that we were going to continue to review very closely the way GTech were managed by Camelot and to ensure that all the commitments that they had given were progressively put into place, and that we believed that that could not be done until November of that year. When we came in August to make a decision about whether or not the Camelot bid was likely to secure that the Lottery was run with all due propriety over a coming seven year period, the period of the licence, the Commission concluded that it could not come to that view given the recent track record of GTech, and although GTech, as you say, was just the right side of the fence, if it went wrong one more time or failed to meet the commitments that it had given but not yet fully demonstrated, then the Commission would probably have had to revoke the licence.

  Mr Gardiner: Mr Harris, I understand how in July you can be of one view, how in August you can be of a different view, and how in December you can be of yet a different view again. What I do not understand is how in August you can hold two contradictory views, and it appears to me that you did. No further questions.

Mr Bacon

  79. Mr Harris, I would like to continue with Mr Gardiner's line of questioning because he has hit on something I find very puzzling, and I have not found your answers at all satisfactory, to be honest. Could you just repeat for my benefit why you originally decided that you could not accept either bid?
  (Mr Harris) We decided in the case of the Camelot bid that, with GTech in the position it was in, we could not be satisfied that the Lottery would be run with all due—sorry.

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