Written evidence submitted by Camelot
UK Lotteries Limited (arts 38)
1.0 INTRODUCTION
1.1 Camelot welcomes the opportunity to
respond to the Culture, Media and Sport Select Committee's inquiry
into the funding of the Arts and Heritage. As the operator of
The National Lottery, we have concentrated our remarks on the
role of Lottery funding in these areas and suggested certain policy
reforms that we believe could assist in increasing the amount
of money available to the Good Causes in order to continue contributing
significant amounts to arts and heritage as well as to sport and
the voluntary sector.
1.2 Since The National Lottery began almost 16
years' ago, the Arts and Heritage sectors have benefited enormously;
from the injection of funds to major capital projects, to support
for small community-based initiatives. Since 1994, the Arts have
received in the region of £3.6 billion and Heritage £4.4
billion of lottery funding[15].
There have been thousands of beneficiaries including: Tate Modern,
Sage Music Centre—Gateshead, Royal Festival Hall, Lowry
Centre—Salford, Dorset Natural History & Archeology
Society, Lancashire Wildlife Trust, Birmingham Hippodrome Theatre,
Kinder Children's Choir—High Peak and the Ilkley Literature
Festival, to name but a few.
1.3 These figures illustrate not only the importance
of Lottery revenue to the cultural life of the nation, but also
underline how vital it is to have a National Lottery which is
credible, responsible and capable of sustaining and, wherever
possible, increasing sales. For that, we need wide political and
public support, and that requires our regulator, government and
parliament to help us to introduce more speedily those reforms
and innovations we believe necessary to keep the Lottery in robust
health. It also means greater efforts need to be made to ensure
that the public understand better than they do at present, exactly
where the lottery money they have raised is being spent. This
must involve all those that make up the Lottery family, from Camelot,
to the DCMS to all the distributors, including those that represent
the arts and heritage.
2.0 CAMELOT'S
ROLE
2.1 Camelot manages The National Lottery
infrastructure, designs and promotes new games, develops the marketing
support for lottery products, provides services for players and
winners, and runs the network that sells tickets to players in
partnership with over 28,500 retailers UK-wide—as well as
on the internet and mobile telephones.
2.2 Camelot's current Licence (its third) to
operate The National Lottery began on 1 February 2009 and will
run until 2019, with the possibility of a further five year extension.
2.3 Camelot is not responsible for the distribution
of Lottery funds. The allocation of funding is currently the responsibility
of 13 independent distribution bodies designated by Parliament.
The National Lottery Distribution Fund (NLDF) holds the money
raised for good causes by the mainstream (ie non-Olympic) lottery
games. The Olympic Lottery Distribution Fund (OLDF) holds the
money raised for the 2012 Games from both the designated Olympic
lottery games and that transferred from the NLDF.
2.4 National Lottery funding will contribute
up to £2.175 billion towards the cost of the London Games,
of which £750 million will come from a series of designated
lottery games[16].
The total raised for London 2012 from all designated lottery games
is currently over £500 million.
3.0 KEY FACTS
— Efficiency: Camelot runs the most cost-efficient
lottery in Europe, with around 4% of total revenue spent on operating
costs. — Good Causes: each week Camelot generates around
£25 million for the Good Causes. To date, players have raised
over £24 billion for the Good Causes[17],
with more than 330,000 individual awards made across the UK—an
average of 113 lottery grants for every postcode district.
— Returns to society: at around 40% of
total sales (around 28% to the Good Causes and 12% in Lottery
Duty to the Government), Camelot returns a higher proportion of
lottery revenue back to society than any other major lottery operator
in the world in percentage terms.
— Reach: around 70% of adults play The
National Lottery on a regular basis—greater reach than any
other FMCG brand in the UK. More than 96% of the UK adult population
live or work within two miles of a lottery terminal.
— Long-term growth: over the last five
years there has been a 14.4% increase in sales.
— Leading UK brand: The National Lottery
crossed fingers logo is recognisable to 95% of the UK population.
Camelot operates four of the top grocery brands in the UK. One
of those, Lotto, is the single biggest grocery brand in the country.
Total lottery sales each year are bigger than Coca Cola, Warburtons,
Walkers Crisps, Hovis, Cadbury Dairy Milk, Nescaf
, Kingsmill, Andrex, Lucozade and Robinsons combined[18].
— Winners: The National Lottery creates
around four million winners a week across its portfolio of draw-based
and instant play games. More than 2,400 millionaires or multi-millionaires
have been created since launch in 1994 and more than 11,000 people
have enjoyed a share of the Lotto jackpot prize.
— Prize money: £37.5 billion to date.
— Lottery Duty: £9.1 billion to date.
— Retailer Commission: £3.9 billion
to date.
4.0 NATIONAL
LOTTERY SALES
FIGURES
4.1 Annual National Lottery sales: In the
year to 31 March 2010, the first full financial year of the third
lottery Licence, Camelot increased total National Lottery sales
to £5,451.8m, an increase of £302.7m (5.9%) on the previous
year's figure of £5,149.1m—resulting in the second
best sales performance since The National Lottery's launch in
1994. The further rise in sales saw Camelot deliver the best annual
returns, £1,548.4m (excluding investment returns), to the
Good Causes in 10 years—a rise of £170.8m (12.4%) on
2008/9's returns of £1,377.6m.
4.2 The strong sales performance demonstrates
the continuing success of Camelot's long-term strategy for responsible
growth—which is based on offering players a regularly-refreshed
portfolio of games, and innovative and convenient new ways to
play.
5.0 INNOVATION
5.1 As part of its Invitation to Apply for
the third Lottery Licence, the National Lottery Commission (NLC)
asked respondents to examine closely ways in which they might
develop new ideas and services that could increase money to the
Good Causes.
5.2 In our application for the Licence was
the introduction of commercial services intended to deliver additional
revenue to the Good Causes. The types of service being considered
include mobile phone top-ups and electronic bill payments. The
NLC has been conducting a public consultation on these proposals
which has been extended until 17 September in order to give the
Commission time to consider further any legal and competition
implications of such a move. 82.5% of Camelot's revenue from these
services would go to Good Causes and the company structure would
be separate and transparent to ensure no cross-promotion or cross-subsidy.
5.3 Given The National Lottery's unique
role in public life, it is right and proper that these kinds of
innovations should be assessed and scrutinised by the competent
authorities, whether they be the NLC, the Competition Commission
or the Office of Fair Trading. There is nevertheless a general
point that such scrutiny should be weighed against the need to
ensure that decisions about new propositions can be made and these
services brought to market (or not) within a reasonable time frame
as that is the only way in which significant additional monies
can in future be raised for the Good Causes.
6.0 TAX REFORM
6.1 Camelot's efforts to try and persuade
HM Treasury to move The National Lottery to a Gross Profits Tax
(GPT) regime is a particular example of how long it can take government
to decide whether or not to introduce a change that has been mooted
for over six years and which enjoys wide cross-party support.
6.2 GPT is a taxation regime in which tax
is paid after rather than before prizes have been paid to players.
It allows the operator to increase prize payouts on selected lottery
products, enabling the stimulation of sales growth, while at the
same time protecting and ultimately enhancing returns to the Exchequer
and the Good Causes. With GPT, the overall share of revenues for
the Exchequer would fall, but the estimated increase in sales
volumes would increase absolute returns to the Exchequer and the
Good Causes (ie a smaller percentage slice of a larger cake).
6.3 Almost every gambling operator already
enjoys this more beneficial tax treatment, except The National
Lottery, which is the least harmful of all gaming and gambling
pastimes and is the only one charged with raising money for Good
Causes.
6.4 Camelot continues to be in detailed
discussions with HM Treasury and we hope that a new government
may be persuaded to enact this much needed reform sooner rather
than later.
7.0 BETTER REGULATION
7.1 We support a regulatory structure for
The National Lottery that is firmly rooted in the principles of
better regulation and look forward to discussing with the DCMS
and the NLC how government proposes to enact its recent pledge
to merge the NLC with the Gambling Commission. Such a move is
a real opportunity to create a new framework that will reduce
the bureaucracy associated with lottery regulation and increase
efficiencies for both the regulator and the operator. We support
moving from regulation by detailed approval/permission (as at
present) to regulation by Licence to operate.
7.2 As detailed assessments have already
been made as part of the Licence award process we think there
is now a need only for proportionate assessments to be made by
the regulator to check that The National Lottery operator is working
according to commitments made under the terms of the Licence.
This form of regulation is increasingly common and is practiced
in some of the most significant areas of regulated activity—eg
ITV.
7.3 The current Licence is more onerous
and complicated than its predecessor as the NLC took the second
Licence and embellished and expanded it rather than starting again
from scratch and creating a new, simpler Licence that reflected
Camelot's experience of running The National Lottery responsibly
for 15 years. The level of detail to which we are currently subject
comes at a cost which would otherwise benefit the Good Causes.
It is an approach which is also slow and impedes our ability to
introduce new games and ways to play, for instance, as quickly
and efficiently as we should like.
7.4 It is important that reform of the regulatory
framework should be approached as the occasion to introduce root
and branch change to improve efficiency and generate greater returns
to the Good Causes. Approaching it as a minor cost saving measure
in which, for example, NLC staff are simply transferred to the
Gambling Commission's HQ in Birmingham without a fundamental overhaul
of the whole regulatory structure and Licence to operate will
not work and should be strenuously resisted as it could seriously
damage the smooth running of the Lottery.
8.0 ADDITIONAL
RISKS/POLICY
ISSUES
8.1 Society Lotteries: The National Lottery
has always co-existed comfortably with Society Lotteries and we
recognize the valuable part they play in raising funds for a wide
range of charitable causes—eg Hospices or Guide Dogs for
the Blind. However, since the passage of the Gambling Act a new
and more aggressive breed of society lotteries have emerged, several
of which have pitted themselves against The National Lottery.
For example, when the operator, Chariot, launched the Monday lottery
they deliberately criticized The National Lottery in order to
try and attract players. While Monday failed, their tactics demonstrated
the gratuitous damage that could be inflicted on The National
Lottery's reputation. It is as a result of this danger that we
opposed the previous government's decision to double the prize
limits for society lotteries from £200,000 to £400,000.
We warned at the time that this could have a negative impact on
The National Lottery and that government should be aware that
these sorts of measures ran the risk of tipping The National Lottery
into a position from which it would be difficult, if not impossible,
to recover. It is for this reason that we urge the present government
not to make any further changes to society lottery prize limits
for the foreseeable future.
8.2 Remote gambling: Two leading UK gambling
operators with operations in Gibraltar have recently started taking
bets on the outcome of The National Lottery. This is prohibited
under UK law and Camelot is concerned about a development that
we believe offends the spirit and perhaps the letter of the law.
However, as these operators base part of their operations off-shore
there appears little that UK authorities can currently do. At
the request of the Gambling Commission, who recognize that these
activities are potentially damaging to consumers, the DCMS has
recently held a public consultation on ways in which remote gambling
might be regulated. We strongly support this initiative though
we have some reservations about the feasibility of enforcement.
8.3 Public perceptions: While public awareness
of The National Lottery and its crossed fingers logo is extremely
high—recognizable to 95% of the UK population—the
same cannot be said about public recognition of where and how
Lottery money is spent. Camelot was instrumental in setting up
the National Lottery Promotions Unit (NLPU) in 2003 and continues
to co-fund it and be represented on its management board. The
Unit's work has undoubtedly improved levels of public awareness,
for example, through the use of the common brand (incorporating
the crossed fingers logo) for distributors and lottery funded
projects, the successful development of the annually televised
National Lottery Awards and the delivery of public relations campaigns
that have captured the media's attention. However, there remains
scope for improvement and the full support and engagement amongst
distributors and the DCMS with the work of the NLPU will be vital
to help protect the long term health of The National Lottery and
its ability to continue to maximize returns to the Good Causes,
especially at a time when economic pressures may well restrict
other channels of funding. It is only through the prominent and
consistent display of the crossed fingers logo on any project
that involves lottery funding and the continuing communication
of the breadth, depth and impact of that funding that the public
can be made more aware of where the money they have raised has
gone. With greater awareness comes a growing sense of pride in
what they have helped to achieve and continued support for The
National Lottery, resulting in the generation of much needed funds.
9.0 CONCLUSION
9.1 We would welcome any support that the
Committee could offer to help us realize some of the policy reforms
we have outlined in this submission, especially the introduction
of GPT and the overhaul of our regulatory structure. Maintaining
public interest in, and support for, The National Lottery is crucial
if the arts and heritage are to continue benefitting from the
levels of funding they have enjoyed until now, most especially
at a time when public spending is being cut.
September 2010
15 Figures sourced from DCMS database-last updated
16th August 2010 Back
16
The remaining £340 million will come from the Sports Lottery
Fund, and up to £410 million from mainstream National Lottery
games from 2009 Back
17
Including investment income Back
18
Top 100 Grocery Brands, Grocer Magazine/Nielsen-March 2010 Back
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