Examination of Witnesses(Questions 120-139)
MS SUE
STREET AND
MR MARK
HARRIS
WEDNESDAY 22 MAY 2002
120. That is a bit of an understatement. When
you decided to give the contract to The People's Lottery to begin
with or you decided to negotiate with them alone, did you consider
the punter in this?
(Mr Harris) In what way do you mean?
121. It seems to me we are always looking at
the good causes but the person who goes into the newsagent or
supermarket and buys his or her ticket does not seem to come into
the consideration very much here. You went for The People's Lottery,
and the way I read the Report that was not such a good deal for
the punter, because were they not going to change the jackpot
system from 50 something rather than 6 from 49, and does that
not mean that the punter is going to lose out?
(Mr Harris) What it means is that the players will
still get the same proportion of sales in prizes but—
122. It is more difficult to win.
(Mr Harris)—what one gets is much more difficult
to win prizes although the prizes, if one wins them, are much
larger.
123. So I am right? What I am saying is it did
not seem you were very much interested in the person who is actually
paying this £32 billion over seven years. All you were interested
in was ensuring that your good causes got their amount of money
and Camelot got their fair share or more. The punter who walks
into the shop and buys the ticket does not get any consideration
at all?
(Mr Harris) But the key thing the punter can do is
decide which games they wish to play and whether or not they wish
to play at all. In particular, the Lottery tends to offer a range
of games so, if one looks at the current portfolio, there is the
main on-line game and one can go and play that and pay a pound
and have a very small—1 in 14 million—chance of winning
a large jackpot, or alternatively one can play a game like Thunderball
where one has a larger chance of winning a smaller prize. The
evidence suggests that a lot of players like playing games that
give them a very small chance of a very big jackpot.
124. I do not know how the ticket sales are
made up but I suspect that the vast majority of the money is taken
from the main Lottery game, is it not?
(Mr Harris) Yes.
125. I have never brought a scratch card and
I would not—
(Mr Harris) The majority of players play the main
Lottery game because they like to have, albeit a very small chance,
a chance of winning a very large, life-changing sum.
126. So you are backing up my argument again
that the bid from The People's Lottery was worse for the punters?
(Mr Harris) It would have given a smaller number of
punters a bigger amount.
127. Let us move on to figure 3, pages 7 and
8. The fact is that eventually you are going to have to go through
the whole process again, as other members have discussed, and
we certainly obviously do not want a repeat performance as far
as I can see. Again, as I see it, ticket sales are going to be
paramount and the estimation of those, so how are you going to
ensure next time that the ticket sales estimate is more realistic
and the bids for the licences are made more realistic?
(Mr Harris) What we are suggesting and what is set
out here is that the Commission itself sets out a range which
it believes is realistically achievable and asks bidders to bid
to that range and demonstrate how they will achieve that range,
and then allows bidders, if they wish, to say that they can achieve
more than that range and to set out exactly how they are going
to do it, so that the bids are brought down to within realistic
parameters but the bidders are encouraged and given the opportunity
to identify where they can do better.
128. Lastly, now that Camelot has got it, hopefully
they are going to run it okay and it is going to be a success
but it seems to me, and I think this has been mentioned before,
that they are going to be in a very much better position to win
a third term, if you like, are they not, on the basis that they
have the retail network, the equipment and all the information.
How are you going to get a realistic second or third bidder to
give real competition to make sure we do get the best person for
the job in seven years' time?
(Mr Harris) What we have sought to do within the second
licence, the one Camelot have just accepted, is to address such
of those issues as we can so there will be arrangements for a
new bidder to purchase terminals from Camelot for agreed valuation:
full retailer data will be made available because we have made
sure we now hold the intellectual property in that and the agreements
that retailers have do not cause data protection problems so that
information will be passed across as well. We also have agreement
from Camelot that they will co-operate fully so within the terms
of the current licence we have done what we can. Also there is
a range of points here about how we would conduct the competition
which, within the present legislative framework, we believe should
enable us to make the playing field as level as we possibly can.
129. So by the end of the next licence Camelot
will have made after tax presumably, if it stays the same, £1.2
billion?
(Mr Harris) No. Camelot's profit after tax in the
first licence period for the whole period was £300 million.
130. So it will be £600 million?
(Mr Harris) No. On the basis of their bid, where they
have cut their profit margin considerably, the figures depend
very much on the projections. The projections Camelot gave if
they achieved sales of £51 billion suggested their profit
would be around £250 million. It would be very substantially
less than that if sales levels are down towards £35 billion.
Their profits also depend on their own management of costs.
Mr Osborne
131. When the Lottery Commission was set up
in 1999 under the Act, one of the ideas was to bring on board
people with a wider range of experience and expertise of the lottery
market (page 11, paragraph 1.4). Ms Street, how many of the Lottery
commissioners have experience of the lottery market?
(Ms Street) Of the current commissioners there are
two who have been with the Commission throughout.
132. Maybe we could take all the commissioners
ever appointed to the Lottery Commission. They are set out in
appendix 1, page 32.
(Ms Street) They are. I would need to verify exactly
how many throughout.
133. According to the backgrounds provided here,
not a single one has experience of the lottery market. One is
a former permanent secretary, a couple are civil servants, one
was a director of a charitable trust, one is an accountant, one
is from the Citizens' Advice Bureau, one is from a publishing
company, one was a Tory MP but none actually has experience of
a lottery market.
(Ms Street) I gather that any direct interest in lottery
markets were considered possibly to pose a conflict of interest,
so I think there was probably a real dilemma between finding people
with a track record and those who did not present a conflict of
interest. Certainly the experience and ability of the commissioners
as set out met all the criteria that were applied in their appointment
and they are a pretty heavyweight commission.
134. But none of them seem to have any experience
of the lottery market. It seems a bit odd since when the Secretary
of State for Culture in April 1998 made his announcement he said
that experience of the lottery market, according to this list,
was number one on the list, and none of them has that experience?
(Ms Street) I may have missed something and if I have
I will come back to you, but that is an entirely fair point.
135. They are also said to have experience of
the interest of players. Do you know if any of them play the Lottery?
(Ms Street) I think from the moment they became commissioners
they were disbarred from playing the Lottery and I certainly do
not know what their personal—
136. Do you play the Lottery?
(Ms Street) I love the Lottery. I do not play because
I would face tremendous embarrassment if I won.
Chairman: There is not much chance of
that!
137. An embarrassment easy to overcome, I would
have thought! Mr Harris, I have looked at your CV and you did
not have any experience of the lottery market when you were appointed.
(Mr Harris) No.
138. Do any of your staff?
(Mr Harris) Yes. My staff have experience in the sense
that they—
139. But when they were appointed? Not now.
Obviously they have now because they have been working on it.
(Mr Harris) I think it very unlikely that any of my
staff would have had direct involvement in lottery experience
before, not least because there is only one Lottery in the UK
and there are difficulties of appointing people who had involvement
elsewhere, but my staff have built up very considerable skills
in that. For example, when South Africa launched its lottery,
staff from OFLOT were involved in helping that to happen.
| 
