This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.
Digital, Culture, Media and Sport Committee
What next for the National Lottery?
Date Published: 22 November 2022
This is the full report, read the report summary.
6. Since the first draw in 1994, the National Lottery has been a fixture of British life, so much so that a recent YouGov survey found that it had 99% brand recognition,2 with millions of adults playing National Lottery games every week. All of this has occurred under the stewardship of Camelot, the National Lottery operator since its inception. However, Camelot has faced growing criticism in recent years, as National Lottery draw-based ticket sales and donations to good causes have fallen at the same time as Camelot’s profits have risen.
7. Effectively beginning in 2018, the Gambling Commission designed and operated the fourth National Lottery licence competition, which aimed to right many of the perceived wrongs of the third licence, designed by the Gambling Commission’s predecessor as regulator of the National Lottery, the National Lottery Commission, including the share of profits retained by the operator. However, the competition has not run as smoothly as the Gambling Commission may have hoped, with major litigation launched against the final decision that may cost the National Lottery, or the taxpayer, hundreds of millions of pounds.
8. There are also questions about the gambling harms of the National Lottery and how the operator’s actions may mitigate or, indeed, increase them for National Lottery players; how well the Government and distributor bodies can align their priorities; and whether the National Lottery is at threat from the wider lottery sector, including society lotteries.
9. The National Lottery Act 1993 established the statutory basis for the National Lottery and designated the good causes that should receive Lottery funding. In 1994, the first National Lottery licence competition was administered by the Director General and the Office of the National Lottery and won by Camelot, beginning its multi-decade administration of the National Lottery. Another competition finalist, Sir Richard Branson’s UK Lottery Foundation, had promised to donate all profits not used to run the lottery to good causes. On losing, Sir Richard said:
With this business there is no risk. It’s a licence to print money … For a few shareholders to cream off hundreds of millions of pounds from this is absolutely wrong.3
10. From 1999, the National Lottery was regulated by the National Lottery Commission, created by the National Lottery Act 1998, but its attempt at running the second National Lottery licence competition received significant criticism. After twice deciding that neither Camelot nor Sir Richard Branson’s new People’s Lottery met the minimum requirements of the competition, it excluded Camelot, effectively awarding the licence to the People’s Lottery. Following a judicial review, Camelot was reinstated, causing the chair of the Commission, Dame Helena Shovelton, to resign. Camelot was eventually awarded the licence, leading to a further resignation.
11. Controversy also surrounded the third licence competition, which concluded in August 2007. The sole rival to Camelot, Sugal & Damani, attacked the process, with chief executive Kamlesh Vijay saying:
with the structure [the National Lottery Commission] used it was inevitable that Camelot would win.4
12. In 2012, the National Lottery Commission and Camelot renegotiated the third licence, including a four-year licence extension to July 2023 and a change allowing Camelot to retain 70% of cost savings, giving 30% to good causes, rather than retaining 20% and returning 80% to good causes, as previously. The Gambling Commission called this “the main driver”5 of Camelot’s subsequent rise in profits; by 2016–17, Camelot’s profits were 122% higher than in 2009–10, while good cause returns had risen by only 2%. Camelot’s profits increased to 1% of sales after tax, as opposed to the 0.6% envisaged by the National Lottery Commission when the licence began in 2009.6 Concurrently, primary good cause contributions, excluding unclaimed prizes, fell from 26.81% of sales in 2009–10 to 20.57% in 2020–21.7 In 2018, the Public Accounts Committee concluded that “Good causes lost out” following the renegotiation.8
13. A further reason for the falling share of profits returned to good causes is Camelot’s promotion of instant-win games and scratch cards, which under the terms of the third licence return a lower percentage of sales money to good causes: for each £1 spent on the lottery, returns for good causes ranged from 34p for draw-based games to 5p–10p for scratch cards. Instant-win games, more associated with problem gambling than typical draw-based games,9 generated more than £1 billion during the pandemic. Between 2010 and 2020, sales of scratch cards and instant-win games increased from £1.4 billion to £3.4 billion per year, while draw-based sales stagnated between £4 billion and £4.5 billion.
14. The Gambling Commission has a statutory obligation to maximise good cause returns from the National Lottery, and according to Andrew Rhodes, chief executive of the Gambling Commission:
That is fundamental in the construction of the fourth licence, which is changing the incentive mechanism.10
The next licence holder will be required to contribute a fixed sum as well as a percentage of any sales over and above that amount, meaning contributions will rise in a similar proportion to profits. The new licence will also remove the differentiation in good cause contributions based on game type. After being named the preferred bidder for the fourth licence, Allwyn stated it would:
reverse the slide towards scratch cards and instant win games, giving due consideration to the wider societal impact these can have.11
15. Camelot has faced accusations of failing to live up to grand promises of good cause returns when applying to National Lottery licence competitions. Although early predictions of £9 billion for good causes emanating from the first licence turned out to be largely correct, returns during the second licence period failed to live up to the £15 billion promised, leading Sugal & Damani to label Camelot’s being granted the third licence “a licence to underperform”.12
16. Furthermore, Sugal & Damani claimed that, on the basis of comparable sales, its third licence bid would have led to 28% of ticket sales being returned to good causes, while Camelot’s would have delivered 27.8%. As it turned out, despite a strong start, with 26.81% of total sales being returned to good causes (primary good cause contributions, excluding unclaimed prizes) in the 2008–09 financial year, the first full year of the licence, this was a high point for Camelot; by the 2020–21 financial year, the most recent for which data are available, only 20.57% of sales money was returned as primary good cause contributions, marginally above the statutory minimum 20%.
17. Camelot was invited to give evidence to this inquiry but turned down the opportunity owing to the ongoing aforementioned litigation, which it believed could have been compromised by discussing anything related to the fourth licence competition. Following extensive negotiation, Camelot was offered the opportunity to give evidence only on its historical performance as the National Lottery operator, which is already a matter of public record, with no questions to be asked on anything related to the fourth licence competition. Unfortunately, Camelot refused to come before the Committee to discuss its record as National Lottery operator.
18. We are disappointed that Camelot chose not to make itself available for scrutiny of its performance as the National Lottery operator.
19. Having subsumed the National Lottery Commission in 2013, it was up to the Gambling Commission to design and run the fourth National Lottery licence competition—4NLC. The competition carried added significance, given the poor handling and controversy of previous competitions, and gave the Commission the opportunity to incorporate into the licence some of the Public Accounts Committee’s 2018 recommendations regarding the failures of the third licence.13
20. The Commission was keen to point out the changes to the terms of the fourth licence, including greater flexibility for the licensee in taking commercial decisions; an updated incentive mechanism to align licensee incentives and good cause contributions; and a fixed 10-year licence period. Andrew Rhodes told the Committee:
Under the fourth licence … the principle is that there is a surplus generated after costs and that surplus is shared between good causes and the operator, which means that it is not incentivised on sales, it is incentivised on driving the best returns for good causes. That then means that it has an incentive to drive the most beneficial gains for good causes, which are largely draw-based gains.14
21. Although preparatory stages began in 2018, 4NLC was due to run in earnest from May 2020 until September 2021, at which point the preferred bidder would be announced, followed by the final licence award the following month. However, the competition quickly ran into difficulties. In May 2020, the competition launch was delayed by three months following market feedback on the effects of the covid-19 pandemic, with another three months added to the transition period, meaning a total delay before commencement of the fourth licence of six months. In August 2020, selection questionnaires and invitations to apply were distributed to potential bidders. In August 2021, the Commission extended the competition by a further six months, meaning an extension of the third licence to 31 January 2024, following representations from competition applicants.
22. In February 2022, media reports suggested that Camelot was set to be named as the preferred applicant for 4NLC:
The National Lottery operator Camelot is on track to retain its lucrative licence after it won the preliminary endorsement of the gambling regulator15
Andrew Rhodes immediately wrote to the Chair to refute these claims and to clarify the role of a “solution risk factor” in the bid scoring process, which sought to estimate the risk of contracting with the different competition bidders and the likelihood of their delivering promised good cause returns. Reports suggested that this would have advantaged Camelot over other bidders, contradicting Commission assurances that bids would be assessed on their own merits, rather than past performance. Andrew Rhodes told the Committee that the “solution risk factor” is
one element of a detailed evaluation framework which is carefully designed to fairly and transparently identify the application that best meets the needs of the National Lottery. The framework, including the solution risk factor, is applied to all applications on the same basis. No aspect of our framework applies differentially to any class of applicant, whether new entrant or incumbent.16
23. On 15 March 2022, Allwyn was announced as the preferred applicant for 4NLC, with media reports that Camelot was likely to challenge this in court:
At the heart of Camelot’s case is expected to be allegations that the regulator changed the rules after Camelot came out top in a scoring system designed to measure the bids. A “risk factor” discount of up to 15pc was due to be applied to financial projections by the bidders. Camelot is expected to claim that a discount was initially applied by the regulator, but later changed to zero in the final adjudication. The change proved crucial because the financial projections lodged by Allwyn, Mr Komarek’s gambling group, projected raising £38bn for good causes, billions more than was proposed by Camelot.17
24. On 1 April 2022, Camelot announced that it was launching legal action over the decision, comprising two elements: first, to suspend the competition process until the end of legal proceedings, preventing the Gambling Commission from formally confirming Allwyn as the operator of the fourth National Lottery licence until the conclusion of Camelot’s litigation, with the ultimate aim of reversing the decision and securing the fourth National Lottery licence itself; and secondly, seeking damages for the Gambling Commission’s decision, which Camelot asserted was based on a flawed process.
25. The commencement of legal proceedings meant an automatic suspension of the Commission’s ability to confirm Allwyn as the winner of 4NLC. However, on 29 June 2022, the High Court lifted this suspension, allowing the Commission to proceed towards Allwyn’s formal confirmation. Camelot and International Game Technology, a subcontractor providing software services, subsequently asked permission to appeal that decision, which the court accepted, thereby reimposing the automatic suspension and legal standstill.
26. Andrew Rhodes confirmed that a minimum 19-month transition period is legally required before the commencement of the fourth licence.18 In September 2022, it was reported that the Gambling Commission’s legal submission to the High Court suggested that, should Camelot succeed in its challenge and secure a delay in the Commission’s final awarding of the contract to Allwyn, in the worst-case scenario
there will be a gap in service between the expiry of the third licence on 31 January 2024 and the commencement of the fourth licence. The commission anticipates there will be an overall shortfall of payment to good causes of at least £1bn and, in the case of an interregnum, considerably more.19
27. However, on 5 September, the Gambling Commission announced that Camelot was withdrawing the element of its litigation that sought to delay the confirmation of Allwyn as the new operator of the National Lottery licence, instead focusing only on seeking damages, with International Game Technology following suit. On 20 September, the Commission announced that it had entered into an enabling agreement with Allwyn, formally confirming Allwyn as the winner of 4NLC and bringing the competition to a close.
28. On being named the Gambling Commission’s preferred bidder, Allwyn pledged to donate £38 billion to good causes over the 10 years of the licence, averaging £3.8 billion per year; it had been forbidden from publicly announcing such details prior to this stage owing to the Commission’s confidentiality rules. In 2020–21, Camelot donated a record £1.88 billion to good causes. Allwyn also pledged to halve the cost of a National Lottery ticket, from £2 to £1.
29. If Camelot and International Game Technology are successful in seeking compensation, reports suggest that the two could be owed up to £600 million in damages.20 Then-Minister Chris Philp stated:
There are clearly a number of ways that damages could be funded if they are awarded. One is that they could come out of good causes. Another, of course, is that they could be funded by the Treasury.21
30. We also touched on the intense secrecy of 4NLC, highlighting how applicants that met Committee members felt that they could not share any details about the licence competition. John Tanner, senior responsible owner at the Gambling Commission for 4NLC, said:
It was only at the point at which we entered into the competition itself that the requirements of confidentiality, under what was termed the application process agreement, kicked in. There was a fairly extensive engagement with parliamentarians, retail groups and lottery distributors, and indeed the wider lottery market, up to that point.
31. The Commission did not allow competition applicants to reveal their identities and refused to be drawn on the forecasted good cause returns of each bid. When questioned on whether the fifth licence competition could be designed to have more transparency in its latter stages, Andrew Rhodes replied:
It would need to be a different process under the National Lottery Act from the one that exists now. I think Parliament would need to take a view, and may well take a view after we have completed this competition, that possibly it should be run differently … I completely understand the frustration that people want to understand what people have bid and why and to express a view on that. The current National Lottery Act requires that the Gambling Commission makes its decision on who should receive the licence, so it is solely for the Gambling Commission, which is how the Act is constructed.22
The Department acknowledged the possibility of directing the Commission to change its competition design process:
The Gambling Commission is responsible for the day-to-day regulation of the National Lottery … It is also responsible for awarding the licence to run the National Lottery. The National Lottery etc. Act 1993 gives the Secretary of State the power to issue … directions to the Gambling Commission concerning the matters that they should take into account in deciding whether or not to grant National Lottery licences, and what conditions the licences should contain.23
32. Ultimately, despite much-touted improvements to the competition process, the Gambling Commission’s first attempt at running a National Lottery licence competition achieved only mixed success at best, with a year’s delay to the original competition timetable and commencement of the new licence, as well as the incumbent licence holder launching litigation over the licence award process. Finally, the Committee, and Parliament more widely, has been unable to properly and openly scrutinise the suitability of the terms of the fourth licence or the competition bidders.
33. The Gambling Commission has followed its predecessors in overseeing a poorly managed competition, and we are concerned by reports of up to £600 million in compensation being taken from the good causes budget.
34. The Gambling Commission must vigilantly monitor Allwyn’s good cause returns to ensure that fund distributors are not once again short-changed.
35. The Gambling Commission should, within six months of the licence process being complete, review its licence competition design process, highlighting areas of failure, and report back to the Committee with its findings. This should include an assessment of changes necessary to transparency and confidentiality rules to facilitate greater parliamentary oversight of the next licence competition.
36. There is an extensive body of research into the harms of various forms of gambling, including lotteries, with draw-based lottery games generally found to pose little harm to the public, although this harm is not zero. Dr Sasha Stark, of the Responsible Gambling Council, told the Committee:
A lot of people do not make the connection as well that there is a level of harm associated with this form of gambling. Results show that there is a level of harm. While compared to most other forms of gambling the level of harm associated with lottery play is low, there is still a percentage of people who experience harm, so lottery play is not a benign form of gambling.24
37. Specific questions around the gambling harms of the National Lottery remain unanswered or require further work. Sales of scratch cards and instant-win games have risen sharply in recent years, now accounting for around 44% of total National Lottery sales, which according to the all-party parliamentary group for gambling-related harm “carry higher risks and incidents of gambling-related harm”.25
38. Anna Powell-Smith, director of the Centre for Public Data, told the Committee that a study of the banking data of 6 million gamblers found evidence of multiple harms emanating from gambling. However, she continued:
That study did not break down lottery or scratch cards separately from other gambling. I think that is possible to do and perhaps it is something that the Gambling Commission should be looking at.26
39. NatCen Social Research found in 2018 that, of players of online slots, casino or bingo games, many of which are instant-win games, 9.2% were problem gamblers, with 35.6% considered “at risk” of becoming problem gamblers. By comparison, only 1.6% of all gamblers (excluding National Lottery players) were considered problem gamblers, with 8.5% deemed “at risk”.27
40. It emerged in March 2022 that Camelot had been fined £3.15 million by the Gambling Commission for failures linked to the National Lottery mobile app. This included sending marketing messages to users who had either self-excluded through Gamstop28 or had been identified by Camelot as showing signs of gambling harm, although none of the 65,400 affected players was subsequently permitted to purchase a National Lottery product via the app.
41. Anna Powell-Smith told us of the potential harms of such targeting, whether to players who have self-excluded or otherwise, with players potentially seeing targeted gambling adverts based on their online behaviours. In particular, she highlighted how the Gambling Commission needs to adapt to these changing strategies, particularly as more players move online:
I think the regulator needs to adapt to that quite urgently and first set out some evidence and research on what advertising platforms are being used, what the impact of these is, could this lead to ads from other operators being seen, how does this fit with policies, and then tie that use of marketing quite closely to what harm we are seeing with excessive play. It needs to intervene the minute there is a feedback loop.29
42. The National Lottery consumer protection strategy states:
Targeting to anonymous players (those not logged into an account) is only carried out if the user has agreed to Camelot’s marketing cookie being placed on their browser. National Lottery account holders are able to opt in and out of personalisation via their account settings. All communications with National Lottery players are in line with the Data Protection Act 2018 and PECR.30
However, given that an estimated 61% of consumers unquestioningly accept all cookies, it is not clear how many players are aware of what they are opting into.31
43. Furthermore, while targeting may only be utilised in such circumstances, the National Lottery will hold much broader data on consumers, which could be used to shape messaging to wider audiences and then be viewed by players at risk of gambling harm. Powell-Smith suggested that access to such data has been refused to MPs on multiple occasions on commercial grounds. She continued:
Given the technologies we are seeing being used, which we know increase gambling—we know that is what they are designed to do very effectively—I think we should be concerned. We should ask more questions about: what kind of harm are you looking at? How are you monitoring this? What percentage of your revenues are coming from what percentage of gamblers? Is there a small number of gamblers who are giving you a lot of revenue? I think the Lottery should be asked for that information.32
44. This personalisation has been used, in part, to promote certain National Lottery products, namely online instant-win games, which not only return a lower percentage of sales to good causes but are more closely associated with gambling harms. National Lottery profits from online instant-win games during the first year of the pandemic rose 49%, which Powell-Smith attributes at least partly to greater personalisation:
Now you have lots and lots of online instant-win games that you can play on your app, online, and that is much more similar to other types of gambling. If you look at the kind of technology that is being used to promote these games, you have targeted advertising, personalised emails, machine learning being used. That is very similar to what other operators are doing and it is not clear that that distinction is being kept with the technology that is being used.33
45. The fine imposed against Camelot earlier this year regarding the National Lottery’s inappropriate targeting of vulnerable consumers is concerning enough in isolation, and more so when considered alongside concerns raised by gambling harms experts that such targeting is being used to push forms of gambling that may be more harmful, and which return less funding to good causes.
46. The Lottery operator and Gambling Commission should collect and share player data with the public, in order to enable independent research into the users of the National Lottery and the potential harms faced by different demographics. This should include frequency of play, types of game played and money spent, as well as demographic data.
47. We recommend that the Gambling Commission commissions research into the gambling harms of National Lottery advertising and marketing, including any personalisation that may lead to the promotion of higher-risk products to vulnerable players. We would expect that to occur within the next six months and for the Committee to then be kept up to date on the details of the research and its findings and policy changes that will result from it.
48. GambleAware is a UK charity that funds research, education and treatment services to help reduce gambling harms. While not a direct provider of treatment services, it commissions such services, giving grants where necessary. In partnership with the NHS, its three primary areas of focus are:
49. At present, in an effort to meet the objectives of the National Strategy to Reduce Gambling Harms, the Gambling Commission asks all companies who profit from gambling to make a minimum annual donation of 0.1% of their gross gambling yield34 to GambleAware. However, this is only a suggestion and there is no obligation on such companies. More generally, GambleAware seeks an industry-wide levy of 1% on gross gambling yield from each company,
to reflect the profits that they make from gambling and the impact they have on levels of gambling harm.35
Between April 2020 and March 2021, the total gross gambling yield of the UK gambling sector was £12.7 billion, meaning that GambleAware would benefit to the tune of £127 million if its levy proposals were accepted.
50. Camelot has in the past faced criticism over its contribution to GambleAware. A 2018 Public Accounts Committee Report detailed how Camelot had promised to increase its contribution to GambleAware from £190,000 to £300,000, with which it claimed GambleAware was satisfied. However, GambleAware told the Public Accounts Committee that such a donation fell well short of expectations. That Report recommended:
Camelot should review its level of contribution to deal with problem gambling and explain to us within six months why this is a fair contribution to GambleAware for such a widely-played gambling product.36
51. Between April 2020 and March 2021, Camelot’s donation to GambleAware was £425,000. However, the gross gambling yield of the National Lottery for that year stood at £3,531,650,000.37 A donation to GambleAware of 0.1% of the National Lottery’s gross gambling yield would therefore have equated to £3,531,650. Even taking into account other costs to Camelot of operating the National Lottery, including primary good cause contributions, lottery duty and retailers’ commission, £524,530,000 is left over, 0.1% of which would be £524,530.
52. However, when asked whether he thought Camelot’s contribution to GambleAware should be higher, then-Minister Chris Philp was not overly concerned, saying:
Not at the level of other gambling firms, because the gambling harms caused particularly by things like online slots and online casinos are significantly higher38
He went on to suggest that reform may appear in the promised upcoming gambling White Paper:
I do not want to pre-empt the gambling White Paper, but we think that we do need to see more money going to research, education and treatment—the services that, broadly speaking, GambleAware currently commission, although others do as well—but that that should principally come from the firms whose gambling activities are causing the majority of the harm.39
53. We think that any operator should, by default, meet the Gambling Commission’s suggested donation to GambleAware, and have an ambition to go beyond that. We will reassess this issue following the publication of the gambling White Paper.
54. Furthermore, Camelot chooses not to display GambleAware branding on National Lottery advertising and marketing materials. John Tanner implied that this is a matter for the National Lottery licence holder, rather than something on which the Gambling Commission should set obligations, with the fourth National Lottery licence merely saying that
the operator has to do everything it can to ensure that the interests of every participant in respect of playing, engaging with or being exposed to the National Lottery and every game are protected, and that includes protection against harm.40
55. When pressed on what would happen in the event that the Commission was not satisfied that the licence holder was doing everything it can to protect players, he made clear that the fourth licence gives the Commission the power to intervene if necessary:
if the Commission is not satisfied that the operator is doing everything that it can, then it is a matter for enforcement.41
However, despite not itself posing major gambling harms, the National Lottery is a major national brand, with some 44% of adults playing in the previous 12 months,42 and some of these may well be at risk of harm. Promoting BeGambleAware.org may well assist in signposting these people, or their families, towards treatment services.
56. GambleAware told the Committee:
The BeGambleAware brand has 49% prompted awareness (increase from 43% in 2019) and is recognised as a destination for information, advice and support (Source: You Gov 2021). Its reach would be greatly expanded through association with the National Lottery, which would ultimately lead to more people understanding the risks and helping people stay safe when gambling.
In particular, the website signposts visitors to the National Gambling Treatment Service (NGTS). This is a network of organisations working together to provide confidential treatment and support for anyone experiencing gambling-related harms and is free to access across England, Scotland and Wales. The NGTS is commissioned by GambleAware, and whenever someone makes contact throughout this network, these providers work alongside each other through referral pathways to deliver the most appropriate package of care for individuals experiencing difficulties with gambling, and for those who are impacted by someone else’s gambling.43
The National Gambling Treatment Service sees 50% of people receiving appointments within three days of referral, and 75% within eight days, with 92% of those completing treatment seeing a reduction in their problem gambling score, thereby reducing their harm from gambling.
57. Although Camelot refused to appear before the Committee, its chief executive previously gave evidence to the Public Accounts Committee in 2018. When asked whether National Lottery products carry GambleAware branding, Camelot CEO Nigel Railton replied:
Not currently, but the majority of our players do not see themselves as gamblers. They see themselves as lottery players.44
Dr Sasha Stark agreed that public recognition of the National Lottery as a form of gambling is low, but Chris Philp was clear that playing the National Lottery is gambling:
We classify it as gambling. It is regulated and overseen by the Gambling Commission.45
58. While it is clearly the case that the National Lottery poses significantly fewer gambling harms than many other forms of gambling, to play a National Lottery game is undeniably gambling, which the National Lottery operator should bear in mind. Including GambleAware branding on National Lottery products would serve two discrete but connected purposes. First, it would signpost to National Lottery players the avenues to go down should they begin to suffer gambling harms from National Lottery products. Secondly, as 44% of people play the National Lottery, it would also massively increase the visibility of GambleAware, making players more likely to contact the service should they or someone close to them begin to suffer gambling harms from other forms of gambling.
59. We recommend that, with immediate effect, all National Lottery products should carry GambleAware branding
60. The Gambling Act 2005 gives the Commission the power to impose penalties on gambling licence holders, including financial penalties, if it thinks the licence holder has breached licence conditions. Furthermore, the Commission has the power to levy payments in lieu of financial penalties that are then directed towards socially responsible purposes.
61. The principles governing the imposition and direction of these payments is set out in the Commission’s statement of principles for determining financial penalties, including:
62. In applying the above principles, the Commission takes into account the following points, where relevant:
63. Crucially, despite specifying that all projects receiving funding should be evaluated, and that this evaluation should be made public, the Commission does not oversee the delivery of projects funded through regulatory settlements, nor does it have any role in monitoring the governance of the recipient organisation.
64. The Commission has a range of metrics to measure the success of its enforcement action, such as its impact metrics,48 and collects statistics on a variety of issues,49 but it does not assess the efficacy of its disbursements in meeting the goals of the national strategy. Andrew Rhodes told the Committee:
As part of our process for reviewing proposals, we consider two important aspects: whether there is sufficient oversight for the programme of work, and whether there are processes in place for evaluation of the project. Therefore, at the point of making a decision on whether a proposal meets the criteria for a settlement, the Commission assesses whether there is a process for metrics and evaluation. We consider it appropriate that the organisations who deliver the projects retain oversight and responsibility alongside their relevant standards or regulatory bodies. This avoids duplication of governance and oversight, and ensures that the Commission is focussed on delivering its own regulatory roles.50
65. However, as became apparent during oral evidence, such an approach may well lead to poor efficacy of disbursements. By the Commission’s own admission, recipient bodies need only demonstrate that their use of the funds will have sufficient oversight and that evaluation of their use of these funds will be undertaken. No evidence is required of the extent of the benefit secured, nor the suitability of the process followed or the sustainability of such projects going forward. It is entirely possible that recipient bodies may use funds inefficiently or improperly and the Commission would have little idea, save for its observation of headline rates of gambling harm.
66. We recommend that the Gambling Commission carries out an evaluation of the effectiveness of delivering the stated objectives of money raised through fines and given to third parties. This evaluation should then be published along with all relevant metrics and data.
67. In January 2020, the Gambling Commission announced that, from April 2020, it would be illegal for consumers to gamble using credit cards. This followed a public consultation held between August and November 2019, the Gambling Commission’s review of online gambling and the Government’s review of gaming machines and social responsibility measures. In support of this decision, the Commission highlighted several statistics, such as that, prior to the change, 800,000 consumers used credit cards to gamble, and that 22% of all those online gamblers using credit cards were classed as problem gamblers, with an even larger number at some risk.51 Interestingly, the Commission did not ban the use of credit cards for gambling more widely. Exemptions were made for non-remote lotteries, such as society lotteries; where customers were purchasing lottery products by post; or when purchasing lottery tickets alongside other products:
Credit cards can still be used to buy lottery tickets and scratchcards from a shop alongside non-gambling products. It would be an unfair expectation on retailers to identify and prevent credit card payments for lottery tickets if they form part of a wider shop.52
Furthermore, after a period of confusion and lengthy discussion with his officials, then-Minister Chris Philp told the Committee that
it would be not very practical or particularly reasonable to ask the customer to disaggregate their purchases and pay for their basket of goods with a credit card and then do a separate purchase with the debit card or with cash on the side. There is a practical consideration around that.53
68. However, there is little clarity around this. In January 2020, Camelot announced the launch of the second phase of its “Being A Responsible Retailer: Supporting Healthy Play” retailer training for National Lottery retailers, following a two-year research and development period and an initial rollout in 2019. This training contains many laudable elements, including on “supporting healthy play” and preventing underage play:
Our Supporting Healthy Play training programme for all National Lottery retailers includes simplified guidelines and training to ensure retailers have an understanding of excessive play and the right tools to be able to support players if appropriate, such as a terminal printout signposting to GamCare and our Responsible Play page. Retailers have been trained to advise and provide information to players, including Games Rules.54
69. Camelot’s press release accompanying the announcement revealed that:
National Lottery terminals were equipped with a ‘Responsible Play’ button at the end of last year as part of this initiative. It allows retailers to print a pink ticket—much like a Lotto, EuroMillions, or Set For Life ticket—with details of where support is available.55
70. However, none of this training could guarantee that a vulnerable National Lottery player is not sidestepping rules meant for their protection by using a loophole in order to gamble on credit. It is also unclear whether there are any circumstances in which a retailer would prevent the purchase of a National Lottery ticket on credit if it was purchased alongside other goods, or whether training supplied by the National Lottery operator is truly sufficient to help retailers spot the signs of problem gambling. When questioned on the number of other goods that would need to be purchased before a retailer should believe gambling on credit to be acceptable, the then Minister answered:
I honestly do not know what the rules are about whether one Mars bar is enough or whether you need to buy a loo roll and some Toilet Duck as well56
71. Exemptions within the ban on gambling on credit are ill thought through and subject to discretion. While the original ban goes most of the way to preventing this form of gambling harm, opt-outs for retailers maintain the possibility for those at risk of gambling harms to gamble on credit.
72. We recommend that this loophole, which allows consumers to continue to gamble using credit cards, should be closed as soon as practicable, following discussions with retailers.
73. After deducting costs and other expenses, the National Lottery operator passes income from the sale of lottery tickets to the National Lottery Distribution Fund, the NLDF, which is administered by DCMS.
74. The National Lottery Act 1993 sets out how the NLDF should distribute funding:
75. The NLDF passes money to 12 distributing bodies, which are overseen by either DCMS or the devolved Administrations:
|
Distributor |
Role and/or purpose |
|
Arts Council England |
Arts Council England was set up in 1946, by Royal Charter, to champion and develop art and culture across England. |
|
Arts Council of Northern Ireland |
The Arts Council of Northern Ireland is the development and funding agency for the arts in Northern Ireland. The Arts Council was originally established in 1962 as a successor to the Committee for the Encouragement of Music and the Arts, which had operated since 1942. |
|
Arts Council of Wales |
The Arts Council of Wales is an independent charity, established by Royal Charter in 1994, to fund and develop the arts in Wales. |
|
British Film Institute |
Founded in 1933, the BFI is a registered charity, governed by Royal Charter, which aims to support and work with the Government and industry to ensure continued growth of the UK’s screen industries. |
|
Creative Scotland |
Founded in 2010, Creative Scotland supports the arts, screen and creative industries across all parts of Scotland. |
|
The National Lottery Community Fund |
The National Lottery Community Fund–legally named “The Big Lottery Fund”–gives grants to organisations across the UK to help them improve their communities. It the largest single distributor of lottery funds and distributes more than £600 million every year. |
|
The National Lottery Heritage Fund |
Established in 1994, the National Lottery Heritage Fund distributes money to fund projects that sustain and transform the UK’s heritage. |
|
Sport England |
Sport England, established by Royal Charter in 1996, invests in sport and physical activity to make it a normal part of life for everyone in England. |
|
Sport Northern Ireland |
Sport NI was established under the Recreation and Youth Service Order 1986 for the furtherance of sport and physical recreation in NI. |
|
sportscotland |
sportscotland (formerly the Scottish Sports Council) is the national agency for sport in Scotland and aims to deliver an active Scotland where people are more active, more often. |
|
Sport Wales |
Sport Wales is the national organisation responsible for developing and promoting sport and physical activity in Wales. It is the Welsh Government’s lead adviser for all things sports and supports its strategies, “Climbing Higher” and “Creating an Active Wales”. |
|
UK Sport |
UK Sport is the nation’s high-performance sports agency and the UK Government’s lead agency for supporting the programming, bidding and staging of major international sporting events across the UK. |
76. Since the National Lottery’s establishment in 1994, more than £46 billion has been raised for good causes,57 with the National Lottery estimating that more than 670,000 individual awards have been made across the country, or more than 240 grants in every UK post code district.58 Camelot currently retains approximately 1% of National Lottery revenue in profit, with approximately 95% going to winners and good causes and 4% spent on operating costs.
77. From total ticket sales of £8,090,700,000 for the financial year ending 31 March 2022, the money was split thus:
78. In January 2019, the National Lottery Heritage Fund launched its 2019–24 “Strategic Funding Framework”, which devolved around 80% of funding decisions to Scotland, Northern Ireland, Wales and three new English areas. The fund’s annual report from 2020 states that 30% of funding was committed to the 25% most deprived areas in each country of the UK.
79. Darren Henley, chair of the National Lottery Forum, and chief executive of Arts Council England, one of the 12 distributing bodies, told the Committee:
Of our National Lottery funding, 75% is now spent outside London, and of our grant-in-aid funding, 60% is spent outside London. That is a historical shift.60
When asked whether there is a plan to help affected institutions in the event that good cause returns fall, Darren Henley said:
I have never had a conversation in which anyone has suggested that they [the Government] would step in.61
80. Although acknowledging the need to commit to a certain level of funding in London, in order to maintain its position as a world-class city, Darren Henley was keen to stress the moves being made by his organisation and others to rebalance National Lottery funding. He also stated that spending could be further rebalanced away from the capital, although he declined to set a target percentage. He also said:
We believe that everybody, everywhere, wherever they live in the country, should have access to projects that allow their own creativity to come to the fore. They should have access to great professional arts and culture on their doorsteps.62
81. The Government has made some moves in this area. In early 2022, the Department announced a 6% uplift in Arts Council funding, about which the Arts Council said:
Where possible this will particularly benefit over 100 Levelling Up for Culture Places identified by the Arts Council and DCMS63
When asked whether the Government could better work to align distributor body investment and the levelling up agenda, the then Minister told the Committee:
Yes, I think that is an area where we can look carefully and see how we can influence that. Obviously, the grant-making bodies operate somewhat at arm’s length, but it is an interesting opportunity that we want to make sure we are fully grasping.64
82. Mr Philp was clear that it should not be the place of Government to interfere with the decision making of distributor bodies, especially as it potentially risked perceptions of overt politicisation. However, he was also clear that the Government could offer guidance to distributor bodies:
I think you can have discussions with the grant-making bodies about issues like geographic focus. You can produce research highlighting areas of economic or social deprivation that would particularly benefit from expenditure, and encourage them in that direction. We cannot have Ministers picking individual projects, but there is a lot we can do.65
83. On 4 November 2022, Arts Council England announced a further redistribution of funding away from London. Its Levelling Up for Culture Places fund received a 95% increase, up to £43.5 million annually, to be split across 78 designated towns across the UK. Furthermore, the number of organisations receiving funding from Arts Council England has increased from 828 to 990, including 282 in the north of England, 78 of which are new recipients of funding. According to the Arts Council,
Many are based in places which have received less cultural funding in the past and where there have been fewer opportunities to access creative and cultural activities.66
84. Furthermore, organisations in the north are to receive £383.5 million over the next three years, with London’s overall funding to be reduced to around a £152 million per year, or one third of the overall annual total of £446 million. As chief executive Darren Henley said,
This is our widest ever spread of investment across the country, ensuring that many more people will have access to a wider choice of exceptional art, culture and creative opportunities on their doorsteps.67
85. We congratulate moves by Arts Council England to rebalance funding across the UK and remain interested in how wider aims to facilitate access to arts and culture might be aligned with the Government’s levelling up agenda. National Lottery-funded organisations and projects could assist in offering opportunities that improve the lives and life chances of people across the UK.
86. We recommend that the Government continues to ensure greater alignment between its investment priorities into areas of high economic or social deprivation and the distribution priorities of National Lottery fund distributors.
87. From the outset of the coronavirus pandemic, NLDF bodies played an important role in the national response. The National Council for Voluntary Organisations estimated that nearly one quarter of charities had no reserves at the coronavirus outbreak, while those that did were cautious about depleting them too drastically, given the risk of a second peak or prolonged period of social distancing. In April 2020, the National Lottery Community Fund announced that its covid funding would prioritise organisations supporting people at high risk from covid; organisations supporting communities most likely to face increased demand and challenges as a direct result of covid; and organisations with high potential to support communities with the direct and indirect impact of covid.
88. In total, the NLCF accelerated distribution of £300 million of Lottery funding over the first six months of the pandemic. As is clear from the nature of the grants it gave, the NLCF helped numerous organisations who had not received NLCF support prior to that. Chief executive David Knott told the Committee:
Over covid, almost half of our awards were to organisations that came to us for the first time.68
89. The National Lottery Heritage Fund invested more than £400 million in the heritage sector in 2020–21, benefiting more than 1,500 organisations; provided “expertise and advice on adapting to the pandemic”; and “prioritised urgent funding for heritage facing the greatest risk”. It established a £50 million heritage emergency fund to help safeguard UK heritage sites and enable them to reopen in line with Government guidelines. National Lottery support for organisations during the pandemic exceeded £1 billion.69
90. The UK Government’s £2 billion Culture Recovery Fund supported more than 5,000 organisations in England, with further support given across the rest of the UK, and is estimated to have supported more than 127,000 jobs and 100,000 freelancers. The fund was partly distributed by National Lottery fund distributors, including the NLCF, the NLHF, Arts Council England and the British Film Institute. David Knott told the Committee that
for every £1 that was invested, £1.70 in value was returned. We supported 4,000 charities to continue to operate that would not otherwise have been able to operate through that period.70
91. When asked whether the Department has a plan to use the experience of the pandemic as a basis to build best practice responses to future crises, then-Minister Philp indicated that an evaluation of the Culture Recovery Fund was commissioned last year, with publication expected 12 to 18 months from that date. He continued:
One of the purposes of that evaluation is to learn the lessons from covid … It is also worth mentioning the National Lottery itself. The 12 distributing bodies did step up very quickly and in the course of the covid response contributed about £1.2 billion. I mentioned earlier the fact that they carry reserves—money they have collected from the National Lottery that they have not yet handed out. In the context of a situation like covid, having those reserves is so important, because you can respond when something unexpected happens that might depress ticket sales and create a financial need.71
92. We await the publication of the evaluation of the Culture Recovery Fund and hope that the Department is able to use it as the foundation for future crisis planning. There is otherwise no guarantee that the admirable response of National Lottery distributor bodies is replicable in the future.
93. We discovered that the link between National Lottery funding and the good causes this benefits is not as strongly understood as it could be. Indeed, a recent YouGov poll found that only 31% of players said that they like that some of the cost of their ticket goes to good causes. In contrast, 59% said that they play for a chance to win big prizes, with 17% saying that they wanted to win smaller prizes but more often.72 However, the National Lottery was established as a means of raising funds for good causes. As the National Lottery states:
Making sure as much money as possible goes towards life-changing projects is incredibly important to us. In fact, it’s what we’re here for.73
94. Perhaps most surprisingly, despite the National Lottery having awarded significant funding to UK athletics over previous years, even elite athletes were unaware of where their funding had come from. Ellie Robinson MBE, a Paralympic gold medallist and world record-holding swimmer, told the Committee:
In loads of interviews I remember loads of people thanking the National Lottery, and in all honesty I had absolutely no idea what they were thanking them for … It must have been after Rio, maybe about 2018, that I discovered that 60% of our funding comes from the National Lottery.74
I think we need to make it blindingly obvious that the National Lottery funds athletes. I am an athlete and I did not even know, so to make the general public realise that they are funding us, you need to make it blindingly obvious.75
95. Meanwhile, Lauren Rowles MBE, a two-time UK Paralympic gold medal-winning rower, was also concerned. When asked whether she thinks there is enough public awareness of the National Lottery’s support for UK athletics, she replied, “No, I don’t think there is”.76
96. However, the overall picture is somewhat mixed. In the run up to the 2021 Tokyo Olympics, the National Lottery launched what Keith Moor, Camelot’s chief marketing officer, called its largest ever campaign, featuring a host of TeamGB and ParalympicsGB athletes. The times these adverts were shown was also significant. The first was aired during the semi-final of the men’s football European Championship, in which England played Denmark, watched by almost 24 million people on ITV and ITV+1.77 It was also shown during the final, in which England played Italy, which had an estimated combined peak audience of 31 million across the BBC and ITV,78 and during the 2021 finale of ITV2’s “Love Island”, watched by an estimated 2.8 million viewers.79 Moor stated:
Through the scale and reach of this campaign—the National Lottery’s largest ever—we want players left in no doubt of the role that they play in supporting our Olympic and Paralympic athletes.80
97. Lauren Rowles and Adam Peaty OBE, a multiple gold medal-winning Olympian and world record holder, discussed the obligation on athletes to mention the positive impact of National Lottery funding on UK elite athlete success. As well as sharing that even her mother was asked to mention the positive impact of National Lottery funding during a radio interview, Lauren Rowles said that, when giving interviews from Tokyo (largely conducted online due to social distancing measures related to the coronavirus pandemic), there was
a screen above the webcam with a little message that said, “Thank the National Lottery in your interview” … I did a TV show off the back of Tokyo and we were actually contracted that we had say, “Please thank the National Lottery” in that interview piece.81
98. We have seen numerous examples of National Lottery marketing in recent years that make no mention of the link between the National Lottery and good causes. At the same time, aside from the advertising around the time of the Olympics, every piece of National Lottery advertising and marketing included reference to the large prizes on offer, often as the primary focus.
99. This is not the first time that such a conclusion has been drawn; in 2018, the Public Accounts Committee found:
The huge contribution made to good causes is less evident to the Lottery player than it used to be … good causes are not mentioned on lottery tickets or well-advertised at the point of sale, either online or in shops.82
The PAC went on to conclude:
Camelot should work with the Lottery Distributors to better publicise the link between good causes and the Lottery and communicate the contribution to good causes from each type of game to customers at the point of sale. We would expect improvements to have been implemented by September 2018.83
100. In response, the Government agreed to the recommendation, sharing details of Camelot’s plans to make improvements in this area, including by working with distributors to unify National Lottery messaging, such as on good cause returns. However, in the years since that Report was released, it is not clear that this work has been as effective as it could be.
101. When questioned on the declining public awareness of the link between the National Lottery and its donations to good causes, the then-Minister seemed to agree with Ellie Robinson, saying:
It is the grant-giving bodies, rather than the actual lottery operator, that attach the branding conditions as they give out grants … I think there is a case for making those conditions stronger, so that when an organisation receives UK National Lottery money, the branding and the association and the publicity that go with it are made stronger. Then, when people go to the local community centre, a local sports club or whatever it may be that has the money, they can see more clearly where it comes from than they do at the moment.84
102. Public awareness of the link between the National Lottery and funding for good causes remains lower than it should be. This risks the public losing sight of the National Lottery’s original purpose, to raise money for good causes, and instead focusing on the prizes on offer, which could lead to public calls for a reduction in good cause returns in order to boost prizes.
103. We recommend that a clear majority of National Lottery product advertising should prominently feature the link between playing the National Lottery and supporting good causes.
104. We recommend that, over the next six months, the distributing bodies consider how they might more effectively ensure that recipients of funding ensure that those benefitting from that funding are aware of the source of their funding. We would like to receive a report from the National Lottery Distribution Fund to inform us of changes to be made.
105. Society lotteries, or charity lotteries, predate the National Lottery and exist primarily to raise funds for charities or other non-commercial organisations. They fall into two types, based on proceeds: smaller society lotteries, the proceeds of which do not exceed £20,000 per draw and which do not have aggregate proceeds in excess of £250,000 in any one year, must register with the local authority;85 and large society lotteries, the proceeds of which must not exceed £5 million and which are regulated by the Gambling Commission and must donate a minimum of 20% of proceeds to good causes, with only reasonable expenses allowed. In 2019, it was estimated that approximately 500 large society lotteries held 850 Gambling Commission licences (many large society lotteries hold remote and non-remote licences), with more than 50,000 small societies registered to operate with local authorities.86
106. Camelot has previously suggested that the reason for its rising marketing costs is similar growth in the same costs for its competitors, most prominently society lotteries:
Allowing these operators to now offer similar top prizes to existing National Lottery games and to spend even more on their marketing will make it even easier for them to compete more directly with the National Lottery—and so jeopardise future returns to good causes and society87
107. However, the National Lottery’s stalling returns to good causes appear to be the result of choices made by Camelot, which has prioritised games that allow it to retain a higher percentage of sales as profit, with a lower percentage required to be returned to good causes. Such has been Camelot’s reliance on these games that the Gambling Commission designed the fourth National Lottery licence to effectively prohibit such behaviour. Furthermore, according to the Gambling Commission’s industry statistics, for the year from April 2020 to March 2021, the National Lottery and society lotteries both achieved record sales, suggesting that an improvement in the sales of one does not automatically detract from the sales of another.88
108. When asked whether society lotteries pose a threat to the National Lottery, Andrew Rhodes told the Committee:
Not from anything that we have seen in our research and monitoring … Society lotteries play an important role in fundraising and supporting other causes and we have not seen that present a threat … It is not something that we currently believe is a particular threat89
The then Minister concurred, telling the Committee:
We want to make sure that the society lottery concept does not overlap or compete with [the National Lottery], and I think at the moment, broadly speaking, it doesn’t. It does operate in a different space90
109. In 2019, the Government announced reforms to the regulations governing society lotteries, including:
110. These changes came into force in July 2020, after which, as confirmed by the most recent update to the Gambling Commission’s industry statistics, society lotteries’ ticket sales and returns to good causes have risen.91 Between April 2019–March 2020 and April 2020–March 2021, sales increased from £831.97 million to £871.66 million, a 4.77% increase. Furthermore, good cause returns grew over the same period, from £367.91 million to £401.86 million, a 9.23% increase. In its one-year evaluation of the changes, the Department said that
early indications have shown that the increased limits are bedding in well and are beginning to have the intended effect of allowing the society lotteries sector to grow and return more to good causes, whilst also maintaining the unique position of the National Lottery.92
111. However, the society lottery sector is not entirely content with the reforms. Lotteries must announce the available prize when tickets begin to be sold, both to give customers certainty about potential winnings, and to avoid falling foul of Gambling Commission regulations on altering prizes. In order to offer a prize greater than £25,000, society lotteries must be extremely careful in the prize they offer at the outset, as they have to ensure that the prize does not exceed 10% of ticket sales:
In practice, the restrictive nature of the limits imposed means the actual top prizes offered by operators tend to be significantly lower, due to operator concern at inadvertently falling foul of legislative requirements which could lead to censure by the Gambling Commission.93
112. The Lotteries Council advocates for the removal of the 10% rule, instead allowing society lotteries to set their own prize limits, up to £500,000. Tony Vick asserts that this would motivate society lotteries to try to sell more tickets, thereby raising good cause returns:
You would only offer a larger prize if you were confident that you were going to get more proceeds from it, wouldn’t you? Therefore, the amount raised for good causes should go up.94
113. According to the Lotteries Council, such a change would maintain the National Lottery’s unique responsibility of offering life-changing prizes, with maximum prizes not rising above their current limits. However, each society lottery would have greater flexibility on the prizes they could offer, hopefully helping them to boost sales, thereby increasing good cause returns. Current regulation, such as per-draw sales limits, statutory 20% good cause returns and the need to cover operating costs, would continue to act as a brake on society lotteries’ offering excessive prizes.95
114. Unlike a society lottery, for which entrants must purchase a ticket, prize draws are divided by the Gambling Commission into two types: those that are entirely free, and those with both free and paid entry routes. Concern has been raised about the latter.
115. This type of draw has been cited as a competitor to society lotteries but faces comparatively little regulation:
|
Society lottery regulations |
Prize draw regulations |
|
All tickets paid for at exactly same price each |
Some free tickets and some paid tickets, discounting permitted |
|
Maximum £500,000 prize |
No limit on value of prize draw |
|
Prize worth no more than 10% of ticket sales |
No ratio of prize- to ticket sales |
|
Maximum ticket sales of £5m per draw |
No limit on numbers of tickets sold per draw |
|
Maximum sales of £50m per annum |
No annual turnover limits |
|
Minimum of 20% of turnover donated to charity |
No requirement to donate to charity |
|
Expensive license process for each society lottery is aid of named good courses; must be non-commercial and specifically not for private gain |
Unlicensed prize draws permissible for entirely private gain |
|
Subject to regulation by Gambling Act and Licensing Conditions and Codes of Practice |
No regulation |
|
Credit cards are not permitted |
Can use credit cards to purchase tickets |
|
Stricter rules apply for advertising society lotteries |
Normal advertising rules apply for gambling product |
|
Strict rules apply about safer gambling |
Not considered gambling |
116. For one recent draw of this nature, for a house the company valued at £3.5 million,96 American for-profit Omaze’s website stated that the RSPCA would receive 80% of the net proceeds, with Omaze earning 20%. It went on:
It is expected that approximately £500,000 will be raised for the charity, which would mean Omaze being paid £125,000. Irrespective of sales, Omaze has guaranteed a minimum total payment of £100,000 for the charity.97
117. As no purchase is necessary to enter the draw, revenues are not protected, and there is therefore no guarantee that Omaze will give any more than its minimum guaranteed £100,000 to the charity (there is no regulation to compel them to donate even this amount) despite heavily featuring donations to the charity in marketing to prospective players. It is also unclear how Omaze calculates “net proceeds” and what it deems reasonable to deduct from revenues before donating to charity. Following the draw, Omaze claimed to have raised £1 million for the RSPCA.98
118. Despite free routes of entry, prize draws remain highly profitable. A recent Opinium survey found that 22% of adults had participated in a prize draw in the previous quarter, spending an average of £18.70. Annualised, this equates to £860 million per year,99 only marginally lower than the roughly £872 million that society lotteries received in the year April 2020 to March 2021.100 But while the society lottery sector returned more than £400 million to good causes in the same period, prize draw operators were under no obligation to return any money whatsoever. Furthermore, despite Omaze’s boasting of raising £250,000 for Teenage Cancer Trust, £500,000 for The Prince’s Trust, £1,000,000 for the British Heart Foundation and £1,000,000 for the NSPCC’s Childline,101 independently verified data is seemingly non-existent, as it is for the wider prize draw sector’s charitable giving.
119. It is curious that the National Lottery operator has chosen not to raise this issue publicly. When the Government consulted on, and then proposed changes to, society lotteries, Camelot was vocally against the plans, arguing that they would
risk further cannibalising sales of National Lottery products which represent the most efficient means of generating returns to society.102
It went on to state that:
For The National Lottery the prime motivation for most players is the chance to win life-changing prizes—which are the preserve of The National Lottery—with the secondary motivator being the prospect of giving to Good Causes.103
120. However, it is certainly arguable that the £3.5 million home offered by Omaze is life-changing. It is also arguable that Omaze’s marketing prioritises this life-changing prize, with little guarantee that any funding would go to good causes as a result of ticket sales. When asked his thoughts on the issue, the Minister responded:
We are very aware of the issues that you are raising and the impact that activity in this area may have on other parts of the fully regulated sector. We obviously have a gambling White Paper due to come out, I hope, quite imminently. I do not want to pre-empt its contents, but this is the kind of topic that might feature in that.104
121. We do not consider that society lotteries pose a threat to the charitable giving of the National Lottery, in line with the views of the Gambling Commission and the Department. Recent years have seen significant reforms to society lottery regulation that have allowed total sales and good cause returns to reach record levels at the same time as the National Lottery achieved record sales.
122. We recommend that the 10% rule for society lotteries should be removed, instead allowing individual society lotteries to set their own prizes, up to a limit of £500,000.
123. It is difficult to understand why the National Lottery has been so hostile towards society lotteries while largely ignoring prize draws. It merits further investigation as to whether prize draws, with such large revenues and little regulation, are competing for ticket sales with the National Lottery and the wider lottery sector, potentially significantly reducing the money returned to good causes as a result.
124. We recommend that prize draws be subject to regulation such as that which applies to society lotteries, including on the percentage of sales that must be donated to good causes. We hope that the upcoming gambling White Paper will provide detail on the Government’s plans in this area.
1. We are disappointed that Camelot chose not to make itself available for scrutiny of its performance as the National Lottery operator. (Paragraph 18)
2. The Gambling Commission has followed its predecessors in overseeing a poorly managed competition, and we are concerned by reports of up to £600 million in compensation being taken from the good causes budget. (Paragraph 33)
3. The Gambling Commission must vigilantly monitor Allwyn’s good cause returns to ensure that fund distributors are not once again short-changed. (Paragraph 34)
4. The Gambling Commission should, within six months of the licence process being complete, review its licence competition design process, highlighting areas of failure, and report back to the Committee with its findings. This should include an assessment of changes necessary to transparency and confidentiality rules to facilitate greater parliamentary oversight of the next licence competition. (Paragraph 35)
5. The fine imposed against Camelot earlier this year regarding the National Lottery’s inappropriate targeting of vulnerable consumers is concerning enough in isolation, and more so when considered alongside concerns raised by gambling harms experts that such targeting is being used to push forms of gambling that may be more harmful, and which return less funding to good causes. (Paragraph 45)
6. The Lottery operator and Gambling Commission should collect and share player data with the public, in order to enable independent research into the users of the National Lottery and the potential harms faced by different demographics. This should include frequency of play, types of game played and money spent, as well as demographic data. (Paragraph 46)
7. We recommend that the Gambling Commission commissions research into the gambling harms of National Lottery advertising and marketing, including any personalisation that may lead to the promotion of higher-risk products to vulnerable players. We would expect that to occur within the next six months and for the Committee to then be kept up to date on the details of the research and its findings and policy changes that will result from it. (Paragraph 47)
8. We think that any operator should, by default, meet the Gambling Commission’s suggested donation to GambleAware, and have an ambition to go beyond that. We will reassess this issue following the publication of the gambling White Paper. (Paragraph 53)
9. While it is clearly the case that the National Lottery poses significantly fewer gambling harms than many other forms of gambling, to play a National Lottery game is undeniably gambling, which the National Lottery operator should bear in mind. Including GambleAware branding on National Lottery products would serve two discrete but connected purposes. First, it would signpost to National Lottery players the avenues to go down should they begin to suffer gambling harms from National Lottery products. Secondly, as 44% of people play the National Lottery, it would also massively increase the visibility of GambleAware, making players more likely to contact the service should they or someone close to them begin to suffer gambling harms from other forms of gambling. (Paragraph 58)
10. We recommend that, with immediate effect, all National Lottery products should carry GambleAware branding. (Paragraph 59)
11. We recommend that the Gambling Commission carries out an evaluation of the effectiveness of delivering the stated objectives of money raised through fines and given to third parties. This evaluation should then be published along with all relevant metrics and data. (Paragraph 66)
12. Exemptions within the ban on gambling on credit are ill thought through and subject to discretion. While the original ban goes most of the way to preventing this form of gambling harm, opt-outs for retailers maintain the possibility for those at risk of gambling harms to gamble on credit. (Paragraph 71)
13. We recommend that this loophole, which allows consumers to continue to gamble using credit cards, should be closed as soon as practicable, following discussions with retailers. (Paragraph 72)
14. We congratulate moves by Arts Council England to rebalance funding across the UK and remain interested in how wider aims to facilitate access to arts and culture might be aligned with the Government’s levelling up agenda. National Lottery-funded organisations and projects could assist in offering opportunities that improve the lives and life chances of people across the UK. (Paragraph 85)
15. We recommend that the Government continues to ensure greater alignment between its investment priorities into areas of high economic or social deprivation and the distribution priorities of National Lottery fund distributors. (Paragraph 86)
16. We await the publication of the evaluation of the Culture Recovery Fund and hope that the Department is able to use it as the foundation for future crisis planning. There is otherwise no guarantee that the admirable response of National Lottery distributor bodies is replicable in the future. (Paragraph 92)
17. Public awareness of the link between the National Lottery and funding for good causes remains lower than it should be. This risks the public losing sight of the National Lottery’s original purpose, to raise money for good causes, and instead focusing on the prizes on offer, which could lead to public calls for a reduction in good cause returns in order to boost prizes. (Paragraph 102)
18. We recommend that a clear majority of National Lottery product advertising should prominently feature the link between playing the National Lottery and supporting good causes. (Paragraph 103)
19. We recommend that, over the next six months, the distributing bodies consider how they might more effectively ensure that recipients of funding ensure that those benefitting from that funding are aware of the source of their funding. We would like to receive a report from the National Lottery Distribution Fund to inform us of changes to be made. (Paragraph 104)
20. We do not consider that society lotteries pose a threat to the charitable giving of the National Lottery, in line with the views of the Gambling Commission and the Department. Recent years have seen significant reforms to society lottery regulation that have allowed total sales and good cause returns to reach record levels at the same time as the National Lottery achieved record sales. (Paragraph 121)
21. We recommend that the 10% rule for society lotteries should be removed, instead allowing individual society lotteries to set their own prizes, up to a limit of £500,000. (Paragraph 122)
22. It is difficult to understand why the National Lottery has been so hostile towards society lotteries while largely ignoring prize draws. It merits further investigation as to whether prize draws, with such large revenues and little regulation, are competing for ticket sales with the National Lottery and the wider lottery sector, potentially significantly reducing the money returned to good causes as a result. (Paragraph 123)
23. We recommend that prize draws be subject to regulation such as that which applies to society lotteries, including on the percentage of sales that must be donated to good causes. We hope that the upcoming gambling White Paper will provide detail on the Government’s plans in this area. (Paragraph 124)
Julian Knight, in the Chair
Kevin Brennan
Clive Efford
Julie Elliott
Rt Hon Damian Green
Dr Rupa Huq
Simon Jupp
Jane Stevenson
Giles Watling
Draft Report (What next for the National Lottery?), proposed by the Chair, brought up and read.
Ordered, That the draft Report be read a second time, paragraph by paragraph.
Paragraphs 1 to 124 read and agreed to.
Resolved, That the Report be the Fourth Report of the Committee to the House.
Ordered, That the Chair make the Report to the House.
Ordered, That embargoed copies of the Report be made available, in accordance with the provisions of Standing Order No.134.
Adjourned till Tuesday 22 November 2022 at 9.30 am.
The following witnesses gave evidence. Transcripts can be viewed on the inquiry publications page of the Committee’s website.
Adam Peaty MBE, Olympic swimmer; Ellie Robinson MBE, Paralympic swimmer; Lauren Rowles MBE, Paralympic rowerQ1–59
Anna Powell-Smith, Founder, Centre for Public Data; Dr Sasha Stark, Senior Researcher, Responsible Gambling CouncilQ60–93
Dr Darren Henley OBE, Chief Executive, Arts Council England, Chair, National Lottery Forum; David Knott, Chief Executive, National Lottery Community FundQ94–147
Clara Govier, Managing Director, People’s Postcode Lottery; Donald Macrae, Promoter, Health Lottery; Tony Vick, Chair, Lotteries CouncilQ148–268
Andrew Rhodes, Chief Executive, Gambling Commission; John Tanner, Executive Director, Gambling CommissionQ269–322
Chris Philp MP, Minister for Tech and the Digital Economy, Department for Digital, Culture, Media and Sport; Ben Dean, Director of Sport, Gambling and Platinum Jubilee, Department for Digital, Culture, Media and SportQ323–376
The following written evidence was received and can be viewed on the inquiry publications page of the Committee’s website.
LOT numbers are generated by the evidence processing system and so may not be complete.
1 All Party Parliamentary Group for Gambling Related Harm (LOT0003)
2 Centre for Public Data (LOT0006)
3 Clean Up Gambling (LOT0001)
4 Department for Digital, Culture, Media and Sport (LOT0004)
5 Gambling Commission (LOT0005), (LOT0009)
6 National Lottery Distributors (LOT0007)
7 People’s Postcode Lottery (LOT0010)
8 Stark, Dr Sasha (LOT0008)
All publications from the Committee are available on the publications page of the Committee’s website.
|
Number |
Title |
Reference |
|
1st |
Amending the Online Safety Bill |
HC 271 |
|
2nd |
Promoting Britain abroad |
HC 156 |
|
3rd |
Reimagining where we live: cultural placemaking and the levelling up agenda |
HC 155 |
|
1st Special |
Major cultural and sporting events: Government Response to Committee’s Ninth Report of Session 2021–22 |
HC 452 |
|
2nd Special |
Influencer Culture: Lights, camera, inaction?: ASA System and CMA Responses to the Committee’s Twelfth Report of Session 2021–22 |
HC 610 |
|
3rd Special |
Influencer Culture: Lights, camera, inaction?: Government Response to the Committee’s Twelfth Report of Session 2021–22 |
HC 687 |
|
4th Special |
Rt Hon Nadine Dorries MP |
HC 801 |
|
Number |
Title |
Reference |
|
1st |
The future of UK music festivals |
HC 49 |
|
2nd |
Economics of music streaming |
HC 50 |
|
3rd |
Concussion in sport |
HC 46 |
|
4th |
Sport in our communities |
HC 45 |
|
5th |
Pre-appointment hearing for Information Commissioner |
HC 260 |
|
6th |
Pre-appointment hearing for Chair of the Charity Commission |
HC 261 |
|
7th |
Racism in cricket |
HC 1001 |
|
8th |
The Draft Online Safety Bill and the legal but harmful debate |
HC 1039 |
|
9th |
Major cultural and sporting events |
HC 259 |
|
10th |
Another pre-appointment hearing for Chair of the Charity Commission |
HC 1200 |
|
11th |
Pre-appointment hearing for Chair of Ofcom |
HC 48 |
|
12th |
Influencer culture: Lights, camera, inaction? |
HC 258 |
|
1st Special Report |
The future of public service broadcasting: Government Response to Committee’s Sixth Report of Session 2019–21 |
HC 273 |
|
2nd Special |
Economics of music streaming: Government and Competition and Markets Authority Responses to Committee’s Second Report |
HC 719 |
|
3rd Special Report |
Sport in our communities: Government Response to Committee’s Fourth Report |
HC 761 |
|
4th Special Report |
The future of public service broadcasting: Ofcom Response to Committee’s Sixth Report of Session 2019–21 |
HC 832 |
|
5th Special |
The Draft Online Safety Bill and the legal but harmful debate: Government Response to the Committee’s Eighth |
HC 1039 |
|
Number |
Title |
Reference |
|
1st |
The Covid-19 crisis and charities |
HC 281 |
|
2nd |
Misinformation in the COVID-19 Infodemic |
HC 234 |
|
3rd |
Impact of COVID-19 on DCMS sectors: First Report |
HC 291 |
|
4th |
Broadband and the road to 5G |
HC 153 |
|
5th |
Pre-appointment hearing for Chair of the BBC |
HC 1119 |
|
6th |
The future of public service broadcasting |
HC 156 |
|
1st Special Report |
BBC Annual Report and Accounts 2018–19: TV licences for over 75s Government and the BBC’s Responses to the Committee’s Sixteenth Report of Session 2017–19 |
HC 98 |
|
2nd Special Report |
The Covid-19 crisis and charities: Government Response to the Committee’s First Report of Session 2019–21 |
HC 438 |
|
3rd Special Report |
Impact of Covid-19 on DCMS sectors: First Report: Government Response to Committee’s Third Report of Session 2019–21 |
HC 885 |
|
4th Special Report |
Misinformation in the COVID-19 Infodemic: Government Response to the Committee’s Second Report |
HC 894 |
1 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898
2 YouGov, National Lottery popularity & fame
3 BBC, 1994: Camelot wins UK lottery race, 25 May 1994
4 Guardian, Lottery firm looks at legal action after Camelot wins bid, 28 August 2007
5 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898
6 Ibid.
7 Gambling Commission, Industry Statistics, May 2021
8 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898
9 Q62
10 Q300
11 Allwyn, A fresh start for the National Lottery, 17 March 2022
12 The Guardian, Lottery firm looks at legal action after Camelot wins bid, 28 August 2007
13 Ibid.
14 Q281
15 The Telegraph, Camelot hits the National Lottery jackpot - again, 9 February 2022
16 Private correspondence from Andrew Rhodes, 25 February 2022
17 The Telegraph, Camelot to challenge Czech billionaire’s National Lottery win, 26 March 2022
18 Q277
19 The Observer, Good causes could lose £1bn as Camelot sues over ‘unlawful’ national lottery licence, 4 September 2022
20 The Times, Camelot raises new lottery concerns, 4 July 2022
21 Q326
22 Q285
23 Department for Digital, Culture, Media and Sport (LOT0004)
24 Q62
26 Q64
27 NatCen Social Research, Gambling behaviour in Great Britain in 2016, September 2018
28 Gamstop is a free gambling self-exclusion service that enables users of gambling websites and apps to self-exclude themselves for 6 months, 1 year or 5 years, which they are unable to override once effective. More information can be found here: https://www.gamstop.co.uk/
29 Q89
30 National Lottery, Consumer Protection Strategy
31 YouGov, Global: How consumers respond to cookies disclosures, 13 August 2021
32 Q73
33 Q71
34 Gross gambling yield is calculated using the following formula: A + B - C
A is the total of any amounts that will be paid to the licensee by way of stakes in the relevant period in connection with the activities authorised by the licence.
B is the total of any amounts (exclusive of value added tax) that will otherwise accrue to the licensee in the relevant period directly in connection with the activities authorised by the licence.
C is the total of any amounts that will be deducted by the licensee in respect of the provision of prizes or winnings in the relevant period in connection with the activities authorised by the licence.
(Gambling Commission, Regulatory returns guidance)
35 Correspondence to the Chair, GambleAware, 27 May 2022
36 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898
37 Gambling Commission, Industry Statistics
38 Q346
39 Q346
40 Q297
41 Q298
42 YouGov, What draws Brits to the lottery – and what is stopping others?, 27 September 2021
43 Correspondence to the Chair, GambleAware, 27 May 2022
44 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898, Q12
45 Q350
46 Gambling Commission, Statement of principles for determining financial penalties, June 2017
47 Gambling Commission, Guidance for submitting a proposal for Regulatory Settlement funding, 4 May 2022
48 Gambling Commission, Impact metrics
49 The Gambling Commission, Statistics and research
50 Andrew Rhodes, Correspondence to the Chair, 14 July 2022
51 Gambling Commission, Gambling on credit cards to be banned from April 2020, last updated 12 August 2021
52 Gambling Commission, Gambling using a credit card, last updated 23 November 2021
53 Q336
54 National Lottery, Consumer Protection Strategy
55 Camelot, Camelot begins next phase of healthy play training in retail, 31 January 2020
56 Q335
57 The National Lottery, Where the money goes
58 Ibid.
59 Ibid.
60 Q130
61 Q131
62 Q130
64 Q360
65 Q361
66 Arts Council England, £383 million new funding for the North, 4 November 2022
67 Arts Council England, Bringing creativity and culture to your doorstep, 4 November 2022
68 Q96
70 Q136
71 Q372
72 YouGov, What draws Brits to the lottery – and what is stopping others?, 27 September 2021
73 National Lottery, Where the money goes
74 Q26
75 Q27
76 Q34
77 BBC News, Euro 2020: England victory over Denmark watched by 23.86m, 8 July 2021
78 The Guardian, Euro 2020 final attracts estimated 31 million TV audience in UK, 12 July 2021
79 Daily Mail, Love Island 2021 final ratings are DOWN on the last summer series as 2.8 million viewers see Liam Reardon and Millie Court crowned champions, 24 August 2021
80 Campaign, National Lottery launches ‘biggest’ campaign to support Team GB at Tokyo 2020, 8 July 2021
81 Ibid
82 Public Accounts Committee, Thirty-First Report of Session 2017–19, The future of the National Lottery, HC898
83 Ibid.
84 Q324
85 Gambling Commission, Society Lotteries, last updated 11 June 2021
86 Department for Digital, Culture, Media and Sport, Government response to the consultation on society lottery reform, 16 July 2019
87 Financial Times, Camelot: raising top prize bar on other lotteries will hit charities, 16 July 2019
88 Gambling Commission, Industry Statistics, May 2021
89 Q286
90 Q357
91 Gambling Commission, Industry Statistics, May 2021
92 Department for Digital, Culture, Media and Sport, One year review of society lotteries sales and prize limits, 1 March 2022
94 Q225
96 Omaze, Meet the winner of our Cotswolds house
98 Omaze, Meet the winner of our Cotswolds house
99 Lotteries Council (LOT0012)
100 Gambling Commission, Industry Statistics, July 2022 revision
101 Omaze, We think about giving differently
102 Camelot, Response to the Department for Digital, Culture, Media & Sport Consultation on Society Lottery Reform, 7 September 2018, p. 6
103 Ibid, p.32
104 Q375