Examination of Witnesses (Questions 1160
- 1179)
TUESDAY 3 FEBRUARY 2004
MS MOIRA
BLACK CBE AND
MR MARK
HARRIS
Q1160 Dr Pugh: A sharp fall in revenue
might indicate the effect of the Bill and maybe a long drawn out
decline would indicate people just tiring of the Lottery? Something
like that?
Ms Black: You may well be right,
yes.
Q1161 Dr Pugh: What about the effect
on big prize games? Professor Vaughan Williams' evidence indicated
that these could be particularly vulnerable, particularly with
the expansion of large numbers of very effective unlimited slot
machines.
Mr Harris: This area was looked
at when we commissioned some work to advise us in commenting on
the Government's response to the Budd Committee's report. At that
time our advisors believed the American evidence was inconclusive,
and I think Pion Consulting have produced a report more recently
that came to a similar conclusion. We have not had an opportunity
to consider Professor Vaughan Williams' research in depth yet,
but what we have available to us, that was carried out by our
consultants, is a comparison with the Australian Productivity
Commission study in 1999, and that suggested from evidence in
Australia that the impact is likely to be small. We note also
that the amount played by lottery players per week is a fairly
small amount, so whether or not they would want to take the two
or three pounds they typically play and actually go and play that
on unlimited machines is questionable. Also we note that the legislation
that the Government proposes on unlimited prize machines would
restrict them to casinos, which are a very different environment
to the high street. So at the moment we have not considered the
Professor's study in detail, and we will obviously be looking
at that, but our expectation, leaving that aside, is that the
impact will be very limited.
Q1162 Chairman: One of the features
of this pre-legislative scrutiny process has been the extent to
which other gambling outlets now are—and I will choose my
words carefully—extremely nervous of the prospect of proliferation
of a lot of slot machines, access to no maximum stake, no maximum
pay-out. You did not indicate the concern of the National Lottery
Commission that that might affect National Lottery ticket sales
if there were a proliferation of machines. Do you not share that
worry?
Ms Black: I think—and I
am sure Mark will correct me if my memory is at fault—that
we have found—and I am not sure how hard the evidence is—that
people who play slot machines a lot are less likely to buy lottery
tickets. Having said that, if you are looking at very high pay-out
machines, one must anticipate some effect on the Lottery, because
a lot of people play the Lottery because they want that life-changing
big number.
Mr Harris: I think the key part
of our response is that what we understand the Government to be
proposing is that unlimited machines would only be available in
casinos as opposed to being more widely available. Obviously,
if there were very significant deregulation of unlimited machines
so as to make them much more widely available, then we may have
an increased concern. However, I have to say that the evidence
from the Australia Productivity Commission, although there was
a huge proliferation of machines in Australia, was that the impact
on the Lottery was very limited.
Q1163 Lord Brooke of Sutton Mandeville:
I should declare an interest as having been the senior relevant
minister in office when the National Lottery etc Bill, now the
National Lottery etc Act, went through Parliament. Under the current
situation, you are responsible for the regulation of a single
company. Do you think that increases the chances of regulatory
capture?
Ms Black: The Government obviously
considered this when the structure of the regulator was changed
in 1999. Before then we had OFLOT, with a single Director General,
obviously supported by staff. We now have a body of five commissioners,
with a chief executive and staff. The five commissioners are independently
appointed by the Secretary of State, who clearly can refuse to
re-appoint them, or indeed, can remove them if they act improperly.
We are accountable to Parliament, clearly, through our annual
report and indeed appearances before the Culture, Media and Sports
Select Committee, as we were two weeks ago. I suppose, in a sense—something
that is a little bit nebulous—the fact that if we were not
perceived to be acting independently, if we were perceived to
be too close to the operator, I would expect to see some public
criticism, and I am not aware of that. We certainly act independently.
It is not unknown for us to fine Camelot. It is not unknown for
us to say no to what they want to do. That is not a wholly satisfactory
answer. I am not sure there is one. I think independence is largely
down to an attitude of mind.
Q1164 Lord Brooke of Sutton Mandeville:
You said the Secretary of State independently appoints you. What
is the meaning of the word "independently" in that context?
Ms Black: In the sense that they
are appointed, as I understand it, through an advert. I was not
appointed quite like that; there was a full interview procedure
and a lot of people were interviewed. More than that I do not
think I can really add.
Mr Harris: I think the key thing
is that the commissioners are not appointed by commissioners;
they are appointed separately by the Secretary of State, and that
means that there is every opportunity for new blood, new thinking
to come into the Commission when commissioners are appointed,
and commissioners are unlikely to be in a position where, if they
were regulatorily captured, they could appoint more people who
were of a similar mind to themselves. So there is that degree
of challenge when commissioners come aboard.
Q1165 Lord Donoughue of Ashton: On
this independence question of yourselves and Camelot, what outside
agencies or advisors do you employ, and are all of these completely
independent of Camelot?
Ms Black: I am going to pass that
largely over to Mark, but obviously auditors. We employ economic
advisors. We have employed various IT consultants.
Q1166 Lord Donoughue of Ashton: What
about gambling advisors?
Mr Harris: We have not employed
gambling advisors, certainly in the time that I have been at the
Commission. We have employed independent economic consultants.
We obviously have our own lawyers who advise us on legal issues.
We have also specialist IT consultants who advise us on IT issues
and will look at Camelot's IT systems, for example. It is a condition
of employment of those organisations firstly that they have absolutely
no conflict of interest, that they do not work with Camelot during
their time with us, and also that there is a period after they
have finished working for us before they can work for Camelot.
Q1167 Lord Donoughue of Ashton: I
am interested that you do not employ gambling advisors. What steps
do you take before licensing a new game, or permitting Camelot
to launch a new game which is a gambling game, and are these steps
documented? Are they available for scrutiny?
Mr Harris: The legislation requires
that Camelot submit an application for a new game, a written application,
and although there will obviously be a period of discussion beforehand
working through issues, before we issue a licence we will receive
a full application, and that application needs to set out the
evidence necessary for the Commission.
Q1168 Lord Donoughue of Ashton: That
is an application from Camelot.
Mr Harris: An application from
Camelot to launch a new game. That would need to set out to the
Commission the evidence that the game is likely to be operated
with all due propriety, that the game is likely to protect the
interests of the participants—and that is not just participants
in the game but also that it does not encourage excessive or under-age
play—and finally, we would want to see broadly what Camelot's
business case is, not to double-guess that business case but to
be satisfied that Camelot has worked it through.
Q1169 Lord Donoughue of Ashton: Do
you take any expert advice on the information you have just described
supplied by Camelot, or do you rely on the information they provide?
Mr Harris: We do not simply rubber-stamp
the information they provide to us. We look at it very carefully.
If one takes the example of player protection issues, we would
look at that both ourselves, and in so far as monies have to be
secured, we would take legal advice from our lawyers to make sure
the proper arrangements were there for securing. We would also
discuss concerns closely with GamCare, for example. If there are
proposals associated with the game that we are nervous about in
terms of player protection, then we would certainly expect to
take advice from GamCare. If there were IT issues about how the
game was being introduced, again, we may well ask our IT specialists
to look at aspects of the IT provision for that game.
Q1170 Lord Donoughue of Ashton: How
would you assess whether a new game might result in excessive
play?
Mr Harris: In part, we would simply
look at the nature of the game itself, and we would consider how
best to take advice. It is worth saying, as you may well be aware,
that Camelot has been developing its own game design protocol,
which is a tool which it uses to identify the likely threat of
excessive play of a game. We have had that protocol looked at
independently, and we are satisfied that it produces useful evidence.
What the Commission is very clear about is that it does not produce
knock-out evidence, so the Commission does not simply say, "OK,
it has been through Camelot's protocol, therefore it is acceptable."
If the Commission believes that nonetheless there are still issues
to be discussed, we would look at those very carefully and we
would certainly expect to talk to GamCare either informally or
possibly on occasion to seek their views formally on the game,
and we would certainly also encourage Camelot to consult with
GamCare and other specialists in the relevant area.
Q1171 Lord Faulkner of Worcester:
Would you not agree that all those items that you described to
my colleague Lord Donoughue could equally well be performed by
a Gambling Commission? In fact, it is exactly the sort of role
that it would be playing with the parts of industry that it will
be regulating in due course.
Ms Black: We find it difficult
to conceive that all our various duties could appropriately be
split. Underlying everything is our duty to maximise the return
to good causes. That underlies everything we do. Everything forms
an integrated whole: the initial licensing; the subsequent licensing;
amendments to the licensing; our compliance work; our work on
player protection, which can itself lead to amendments to licences;
and licences themselves may lead us to focus on compliance. But
underlying everything is this duty to maximise the returns to
good causes, and it is all integrated; everything informs everything
else.
Q1172 Lord Faulkner of Worcester:
You have come exactly on to my next question, which is: is there
not an inherent conflict between your player protection, which
Mr Harris has described, with reference to new games and existing
games, and the other duties you have, which include, as you pointed
out, the maximisation of returns to good causes? You could just
as easily call it the maximisation of returns to Camelot shareholders,
or the maximisation of taxation to the Exchequer, could you not?
Ms Black: There is something in
your last point. The legislation we are working with at the moment
very clearly makes two primary duties: propriety and player protection,
loosely, and our duty to maximise returns is subsidiary to those
two, is subject to those two, so we do not see any conflict between
them. Clearly, the propriety and player protection has to come
first, but then, subject to that, we are required to maximise
the returns to good causes.
Q1173 Lord Faulkner of Worcester:
You said to Lord Donoughue that underlying everything that you
do is the need to maximise the return to good causes. Which is
it? It cannot be both.
Ms Black: It is underlying.
Mr Harris: The legislation is
quite clear and we are quite clear that the first two issues are
conditions precedent, so the Commission has to be satisfied that
the games are likely to be promoted with all due propriety and
that the interests of players are protected. If either of those
preconditions are not met, the legislation makes clear, and I
am sure the Commission works on the basis that the game cannot
proceed to the third question, but games that satisfy the first
two do fall to the third question, and the Commission does then
have to consider whether or not the game is maximising returns
to good causes. Although, to pick up your point, the Commission
has sought a means by which the retention of the operator is closely
allied to the money it generates for good causes, nonetheless,
situations may well arise, certainly in considering licence competitions
for the main licence for seven years to run the Lottery, but also
issues will come up from time to time where the interests of the
operator and the interests of good causes are not necessarily
exactly the same, and in those circumstances the Commission will
look very hard and will seek to achieve the best possible return
it can for good causes. If that does not impact positively on
the operator, so be it.
Q1174 Lord Faulkner of Worcester:
But there are other gambling products which also maximise returns
to good causes, like, for example, society lotteries. One of the
differences between society lotteries and your scratch card is
that the client who buys a society lottery ticket knows exactly
which good cause is going to get his or her money, whereas your
money goes into the good cause pot. Yet you have resisted so far
the removal of limits on society lotteries, even though the good
causes would benefit from those limits being erased.
Mr Harris: In response to that,
what we have not done is resist that. To our minds, that is a
matter of policy; that is a matter for the Government to reach
a view on.
Q1175 Lord Faulkner of Worcester:
You put in evidence to Budd on that.
Mr Harris: We did not put in evidence
to Budd, no, because Budd specifically excluded consideration
of the National Lottery. What we were asked to do once Budd published
his report was comment to the Government and make an assessment
of what the impact of various elements of Budd, like removing
all limitations on society lotteries, was likely to be. We sought
to assess that and to say to the Government "If you take
this step, it is likely to have this impact on the National Lottery."
That was intended as an issue of information for the Government
to help it make up its mind whether or not to remove the limitations.
We were not making a special plea for the National Lottery and
saying, "This absolutely must be stopped because it would
be disastrous for the National Lottery." That to our minds
is very much an issue for the Government to consider.
Q1176 Lord Faulkner of Worcester:
What you are saying is that your good causes are worth protecting
and the society lottery good cause are not.
Mr Harris: No. What we are saying
is the Government has adopted a policy whereby lotteries are earmarked
for good causes and therefore the policy is that all good causes
should be protected. There is obviously a division within that
between the National Lottery and society lotteries, and that division,
to my mind quite properly, is a matter for the Government. We
simply sought to provide the Government with information about
the impact of changing the rules and removing that boundary, or
enabling that boundary to be moved. It was for the Government
then to consider whether or not it wished to remove some of the
limitations, and indeed, the Government has proposed to relax
some of the limitations and it is keeping some of them. My understanding
of the legislation that is now proposed is that it will remove
a further limitation, which is the ability for society lotteries
to have roll-overs. We are not objecting to that. We are not fighting
it. We simply said to the Government when asked, "This is
the effect we expect it to have."
Q1177 Chairman: One aspect of this,
which I think we would be interested in your observations on,
is the fact that 28 per cent only of the National Lottery ticket
sales goes to good causes, but 50 per cent of society lotteries
generally goes to good causes. So you can understand the tension
that there is, not just in this Committee, but I think amongst
politicians generally, that one lot of good causes are being singled
out for more preferential treatment than other good causes.
Mr Harris: We can understand the
concern the Committee might have on that. It is not a matter on
which we have a view because we are the regulator of the National
Lottery. We are not the regulator of lotteries generally or gambling
generally.
Q1178 Baroness Golding: You said
earlier in answer to a question from Dr Pugh on displacement that
you had not yet had time to look at the evidence that had been
given to this Committee by Professor Vaughan Williams. Obviously
you will need to look at it to be able to maximise the money you
raise for good causes. How are you going to do this without a
gambling advisor?
Ms Black: We may well find we
need to appoint a gambling advisor.
Q1179 Baroness Golding: How are you
looking at other similar evidence that has been coming in without
a gambling advisor?
Mr Harris: We use an economic
advisor, NERA, to look at this evidence, and they look at it from
an economic s background, but using evidence from elsewhere in
the gambling market and evidence from lotteries elsewhere in the
world. So we believe that they are adequately qualified to comment
on the issues that have been raised with us.
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