Culture, Media and SportsWritten evidence submitted by the Health Lottery

The responsibilities of the National Lottery Commission “NLC” were established through amendments to the National Lottery etc, Act 1993 (“the 1993 Act”) by the National Lottery Act 1998. It is responsible in the United Kingdom for licensing and regulating the National Lottery.

Under the provisions of the Act, its overriding statutory duties are to exercise its functions in a manner it considers will secure that:

1.The National Lottery is run, and every lottery that forms a part of it is promoted, with all due propriety.

2.The interests of every participant in the lottery are protected.

3.Subject to these two duties, the Secretary of State and the NLC shall each in exercising those functions do their best to secure that the net proceeds of the National Lottery are as great as possible.

The Gambling Commission “GC” has a more general remit, which is to permit gambling in so far as it is consistent with licensing objectives of (a) not becoming a source of crime or disorder or be used to support crime; (b) ensuring that gambling is conducted in a fair and open way and (c) protecting children and other vulnerable persons from being harmed or exploited by gambling.

We have the following comments regarding the proposed merger of the NLC and the GC:

Regarding the merits or otherwise of the merger of these two bodies and any potential conflict of interests which might arise as result of a merger and the governance structures which might overcome these

Areas of Concern

In the case of society lotteries as a whole, and The Health Lottery “THL” in particular, we find that there is the possibility of a conflict of interest between a regulator minded to support one National Lottery at the expense of any competition and a regulator whose remit is to support and overview a more competitive environment. It is not clear to us, within a merged regulator, where that balance would be struck.

While we agree that actual legislative changes are the remit of parliament rather than the newly-merged regulator, it is our experience that the GC has great powers in interpreting the regulations and publishing sector specific advice notes, particularly in the society lottery sector. Therefore, under the proposals set out, THL has concerns that a conflict of interest could exist between the roles of the NLC and that of the GC.

If such a conflict were to arise, we believe it could negatively impact our ability to raise funds for the society lottery sector as an External Lottery Manager, unless some safeguards are adopted.

Our main concern rests with the fact that at its heart, the responsibility of the NLC is to maximize the amount the National Lottery raises for good causes. Therefore, we believe that a regulatory body incorporating officers whose duties were to protect a monopoly could result in the newly merged regulator having a bias against THL in particular, and the society lottery sector in general. We cannot see how a single regulator can fairly regulate all lotteries if its core function is to prioritise one operator above all others.

This concern is also founded in the actions adopted by Camelot in persisting with the view that THL is a “de facto national lottery”, even though that argument was dismissed by the High Court.

While Camelot’s oft-repeated view may not have been shared by the NLC, the regulator did nothing to prevent Camelot from launching and persisting with legal action against the Gambling Commission. This cost the various parties involved in the Judicial Review millions of pounds in legal fees, moneys that could have been used for better purposes. In general we have concerns about the lack of intervention from the National Lottery Commission on this issue.

Regarding the readiness of the Gambling Commission to integrate the National Lottery Commission into its own structure

Areas of Concern

An additional area of concern rests with the fact that NLC officers, having in the past only dealt with an operator having billions of pounds in revenues, could expect the same unrestricted level of spend on legal and compliance issues from operators within the society lottery sector. Legal and Compliance costs have been one of the largest fixed costs of THL since launch. Merging the two regulators could lead to a mindset where more costly regulatory requirements are imported and applied overall.

Regarding the accuracy of the projected savings which would result following a merger

We accept that the DCMS’ cost saving assessment presented in December 2012 paints an accurate portrait of the financial benefits of this merger. However, we have noticed that it will take a considerable amount of time to recoup the costs of the merger.

While we applaud the government’s commitment in reducing the number and cost of public bodies, we believe that effective regulation must be maintained and that the public and all stakeholders must be treated fairly should the merger proceed as planned.

May 2013