Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses(Questions 160-179)



  160. Supposing he finds that they are not fit and proper? What would that do to the running of the Lottery? I am just asking really whether you have got a fallback scheme because only half the inquiry has been carried out.
  (Mr Harris) My understanding is—

  161. It is not your understanding because these papers are going to be provided to somebody else. It will be about his understanding: whether he thinks in reading the evidence that these are fit and proper people. Supposing he comes up and finds that they are not. Do you have a fallback plan?
  (Mr Harris) I think ultimately it is for the Commission to determine whether or not the people are fit and proper but obviously if Sir John Bourn had views he fed through to us then we would consider them very seriously. In terms of a fallback plan, we are giving considerable thought to this. It is an area where it is very difficult to have straightforward contingency plans so that if the operator is suddenly removed for reasons of fitness and propriety one can have a Lottery in place straight away, but we are currently looking at our own risk management and the Department's risk management arrangements to make sure they fit together, and that we have all the contingency plans we can to deal with those issues.

  162. So I would be wrong to read into an earlier answer you gave, when you said a closure might lead to a significant increase in sales of ticket, that that was anything to do with a fallback plan you might have when we get the other half of this report through?
  (Mr Harris) I was not referring to a fallback plan and also, as I hoped I explained earlier, I was talking about if one took the finishing point of the current Lottery and then the starting point when it was relaunched. But there would be a loss of revenue in the period in between, and that would not be a recoverable loss.

  163. Lastly, how long has this obstruction to the Comptroller & Auditor General gone on? The letter to Alan Williams in paragraph 3 says that the exchanges between the previous chairman of the Committee and himself which suggest that this process of trying to see this information was available began before the last election, is that right?
  (Ms Street) I wonder if my colleague might assist you?
  (Mr Glicksman) The Comptroller & Auditor General wrote asking for these gateways to be opened in May 1998, which was about the same time as the meeting that Mr Williams referred to with the then Secretary of State.

  164. So we have now moved on to May 2002 and only one of the gateways has been opened, although the Permanent Secretary is optimistic the other three will soon be opened.
  (Mr Glicksman) That is correct and, as Ms Street has said, I think it is regrettable it has taken such a long time. There were concerns originally about the implications of opening the gateways for future availability of information to the Lottery Commission, and it took a while before ministers reached a view that they would be willing to take the risk of opening the gateways.

  165. So that we can be completely clear, you are saying it was really the Treasury and other departments which were putting up obstacles that it was not safe to hand this information over to the Comptroller and Auditor General, not that the Department was banging at your door saying, "Where is the information?"
  (Mr Glicksman) The request for the information came from the C&AG and the departments that are responsible for the legislation which needed to be changed were the departments to which Ms Street referred earlier, those departments responsible for the Companies Act, the Criminal Justice Act and the Financial Services Act.

  166. So the request began in May 1998 and the information is yet to be delivered? What date do you think the information is going to be handed to the Comptroller and Auditor General?
  (Ms Street) I hate to give assurances that sound like jam tomorrow, but my best view is that by the end of next month those pathways should be cleared. For the record, I think it is important to note that this Report does say that the Commission had a sound basis for its decision to award the licence to Camelot. I think that is quite important to note. The additional information will be about how they weighed up those things and the Comptroller and Auditor General's views will carry enormous weight, but this Report is clear that the basis for the decision was sound.

  167. Sorry, I thought—and we can ask the Comptroller and Auditor General—when he said it was sound, it was sound on the basis of the information he had, and he did not have this information.
  (Ms Street) I accept that entirely.

  168. Knowing the Comptroller and Auditor General, it would be a unique move for him to make judgments about information he has not seen.
  (Ms Street) No, I accept that.


  169. So at the end of the day the information you had that Sir John has not had about GTech was so serious as to lead you to the conclusion that because they were intimately involved with Camelot, perhaps Camelot was not capable of running this lottery as a proper organisation; is that correct?
  (Mr Harris) The information on our investigation into GTech is information that has been available and is summarised in Appendix 6 of this Report. As I understand it, the information the Comptroller and Auditor General has not been able to see is our vetting information about individuals.

  Chairman: That is what I mean.
  (Mr Harris) Which would certainly include individuals who worked for GTech which would be relevant to our "fit and proper" vetting of individuals

  170. But I am not quite clear on information that you got on the vetting of the individuals which is only available to you which is not available to Sir John whether the information that you obtained was so serious that that affected your decision. You are saying it did not?
  (Mr Harris) That information did not cause us either to nearly find GTech not fit and proper or to raise propriety concerns. The information that caused the Commission to reach those judgments was information that was not gathered through gateways but was gathered through an investigation carried out by the Commission. As far as I am aware, that information was made available to NAO staff and is reflected in this Report accordingly.

Mr Field

  171. If I had been one of the bidders and you collected information on me under the Criminal Justice Act, there would have been a nil return. Are there in any of these four areas nil returns, no information at all collected under these Acts, or is there information collected under all four Acts?
  (Mr Harris) I believe that there would be information collected under all four Acts because we looked at over 600 individuals.

  172. Sure, it is whether there is anything positive. My information would come back, as it would for all members of the Committee that there was nothing found under the auspices of the Criminal Justice Act and therefore there would be nothing in the file to give to the Comptroller and Auditor General. What I am asking you is whether under the trawl under these four Acts there is information that you will be handing over?
  (Mr Harris) There will be files, there will be information. The information did not cause the Commission to take steps on fitness and propriety but, nonetheless, from my past experience as an auditor myself, I would still want to see the file and understand that the nil returns were actually there and that they were nil and that there were not returns in there that raised serious concerns that had not been addressed by the Commission.


  173. Will the processes of the vetting be covered in the information that you give Sir John?
  (Mr Harris) Yes, as far as I am concerned, as soon as I am clear that there is no criminal law problem, I will make information on the processes and the individual files of information that we hold available to Sir John. He is free and absolutely should be free to see all the information we are holding in those areas.

Mr Jones

  174. Can I take you back to page 11 and the key facts of the National Lottery. The figure at the bottom shows that the Government has received over £4 billion in Lottery duty. That is not the end of story, is it? They take eight per cent on the ticket sales but then there is £10.6 billion raised for good causes, much of which goes on capital projects on which the government gets 17Ö% VAT plus all the employment taxation on the people who work on those capital taxes, and then there is £16.5 billion in prizes and people go out and buy things with that, so the Government gets VAT again, and it gets the duty when people go and buy a crate of champagne to celebrate their win. Were you under any pressure from the Government to keep the Lottery going and not have a gap?
  (Mr Harris) No, the Government did not put any pressure on us or seek to influence the way in which the Commission was carrying out its responsibilities. The Commission itself believed strongly that in order to satisfy its responsibility to maintain returns to good causes, that if it could reach a situation properly and without cutting across or failing to comply fully with its statutory responsibilities, then it would do all it could to keep the Lottery running.

  175. So when you decided that of the two final bidders neither bid was compliant, presumably you had a crisis meeting of some sort to decide how you went forward from there. Can you talk us through what happened then?
  (Mr Harris) When the Commission came to that view, before it announced that decision—and I think it is referred to in the Report—the Commission went and met the Secretary of State and told the Secretary of State that this was the position it believed it had reached and therefore this was the action it was going to take. Subsequent to that meeting, officials from the Department met some of my staff to talk about what the alternatives were if it reached the point where the Lottery could not be kept running. In the event, through twists and turns, that point was never reached.

  176. So initially bringing you on to page 15, 2.6, 16 parties expressed an interest by September 1999, but you only received seven letters of intent. Was there any explanation as to why the other nine did not proceed with the letter of intent?
  (Mr Harris) Yes. We met a whole range of parties in that time period. Some of the people came forward. Very soon after the Commission was created we put out press statements and encouraged people to come forward and talk to us if they wished to do so. We also took steps to contact people who had been involved the first time around and we met a number of those people, some of whom said to us for a variety reasons they did not intend to be part of the second competition but, nonetheless, we met them and sought their views and understanding, so that better informed us about what we might do to encourage competition.

  177. One subsequently withdraw from the seven, well two because one was from a parent company and one was from a subsidiary, so it left you with five. Can you explain in a little more detail why the other three were rejected?
  (Mr Harris) None of them was rejected. We did not receive bids from the other three. One of the other three, Trigger 7 Lotto, had intended to bid but subsequently wrote to us just before the due date and said they were unable to complete the financing of their bid and would not be bidding. We did not hear from the others.

  178. When you got to the stage where you decided to proceed with negotiating with the People's Lottery only, and then that was overturned by the Court, one Commissioner, Hilary Blume, resigned because she could not agree with the decision to award the licence to Camelot. Why did she do that? What was her real beef about awarding the contract to Camelot?
  (Mr Harris) Primarily, Hilary took a different view from the other Commissioners. She put out a public announcement at the time, as it was her right to do. She believed that the best return for good causes would be produced by the People's Lottery bid. She placed much more emphasis on the relaunch plans that the bid had and some of the features of the bid and she thought that it would rejuvenate the Lottery and that it was a risk worth taking.

  179. It does say at the end of paragraph 3.43 on page 25 that she thought "the evaluation process had been rigorous and she understood why her fellow Commissioners had reached their decision." So you parted as friends?
  (Mr Harris) Yes.

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